Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2023 | May 10, 2023 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2023 | |
Entity File Number | 001-41090 | |
Entity Registrant Name | Southland Holdings, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 87-1783910 | |
Entity Address, Address Line One | 1100 Kubota Dr. | |
Entity Address, City or Town | Grapevine | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 76051 | |
City Area Code | 817 | |
Local Phone Number | 293-4263 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 47,856,114 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001883814 | |
Amendment Flag | false | |
Common Stock | ||
Document and Entity Information | ||
Title of 12(b) Security | Common Stock, par value $0.0001 per share | |
Trading Symbol | SLND | |
Security Exchange Name | NYSEAMER | |
Redeemable warrants | ||
Document and Entity Information | ||
Title of 12(b) Security | Redeemable warrants, exercisable for shares of common stock at an exercise price of $11.50 per share | |
Trading Symbol | SLND WS | |
Security Exchange Name | NYSEAMER |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Condensed Consolidated Balance Sheets | ||
Cash and cash equivalents | $ 28,930 | $ 57,915 |
Restricted cash | 14,621 | 14,076 |
Accounts receivable, net | 178,723 | 135,678 |
Retainage receivables | 126,092 | 122,682 |
Contract assets | 543,147 | 512,906 |
Other current assets | 24,083 | 24,047 |
Total current assets | 915,596 | 867,304 |
Property and equipment, net | 108,857 | 114,084 |
Right-of-use assets | 18,657 | 16,893 |
Investments - unconsolidated entities | 116,920 | 113,724 |
Investments - limited liability companies | 2,590 | 2,590 |
Investments - private equity | 3,319 | 3,261 |
Goodwill | 1,528 | 1,528 |
Intangible assets, net | 2,057 | 2,218 |
Other noncurrent assets | 3,391 | 3,703 |
Total noncurrent assets | 257,319 | 258,001 |
Total assets | 1,172,915 | 1,125,305 |
Accounts payable | 166,203 | 126,385 |
Retainage payable | 34,828 | 33,677 |
Accrued liabilities | 114,184 | 121,584 |
Current portion of long-term debt | 52,718 | 46,322 |
Short-term lease liabilities | 16,678 | 16,572 |
Contract liabilities | 138,800 | 131,557 |
Total current liabilities | 523,411 | 476,097 |
Long-term debt | 242,669 | 227,278 |
Long-term lease liabilities | 10,556 | 10,032 |
Deferred tax liabilities | 2,878 | 3,392 |
Other noncurrent liabilities | 119,981 | 48,622 |
Total long-term liabilities | 376,084 | 289,324 |
Total liabilities | 899,495 | 765,421 |
Commitment and contingencies (Note 7) | ||
Noncontrolling interest | 10,712 | 10,446 |
Members' capital | 327,614 | |
Preferred stock | 24,400 | |
Common stock | 8 | |
APIC | 269,436 | |
Accumulated deficit | (4,664) | |
Accumulated other comprehensive income | (2,072) | (2,576) |
Total equity | 273,420 | 359,884 |
Total liabilities and equity | $ 1,172,915 | $ 1,125,305 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | ||
Condensed Consolidated Statements of Operations | |||
Revenue | $ 274,829 | $ 258,486 | |
Cost of construction | 255,886 | 253,555 | |
Gross profit | 18,943 | 4,931 | |
Selling, general, and administrative expenses | 15,571 | 14,299 | |
Operating income (loss) | 3,372 | (9,368) | |
Loss (gain) on investments, net | (32) | 280 | |
Other expense, net | (2,599) | (576) | |
Interest expense | (3,254) | (1,967) | |
Loss before income taxes | (2,513) | (11,631) | |
Income tax expense | (1,753) | (1,342) | |
Net loss | (4,266) | (12,973) | |
Net income attributable to noncontrolling interests | 398 | 628 | |
Net loss attributable to Southland Holdings Stockholders | $ (4,664) | $ (13,601) | |
Net loss per share attributable to common shareholders | |||
Basic (in dollars per share) | [1] | $ (0.11) | |
Diluted (in dollars per share) | [1] | $ (0.11) | |
Weighted average shares outstanding | |||
Basic (in shares) | [1] | 44,407,831 | |
Diluted (in shares) | [1] | 44,407,831 | |
[1] The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued. As such, reporting periods prior to the three months ended March 31, 2023 will not present share or per share data. |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Operations (Parenthetical) | Feb. 14, 2023 shares |
Condensed Consolidated Statements of Operations | |
Common stock, shares issued in merger | 0 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | ||
Condensed Consolidated Statements of Comprehensive Income | |||
Net loss | $ (4,266) | $ (12,973) | |
Foreign currency translation adjustment | [1] | 506 | (1,707) |
Comprehensive loss | (3,760) | (14,680) | |
Comprehensive income (loss) attributable to: | |||
Noncontrolling interest | 400 | 484 | |
Southland Holdings Stockholders | $ (4,160) | $ (15,164) | |
[1] Foreign currency translation adjustment is presented net of tax expense of a nominal amount for the three months ended March 31, 2023 and March 31, 2022. |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Equity - USD ($) $ in Thousands | Preferred Stock Adjusted Balance | Preferred Stock | Common Stock Adjustment | Common Stock Adjusted Balance | Common Stock | AOCI Adjusted Balance | AOCI | Additional Paid-In Capital Adjustment | Additional Paid-In Capital Adjusted Balance | Additional Paid-In Capital | Accumulated Deficit | Members Capital Adjustment | Members Capital | Noncontrolling Interest Adjusted Balance | Noncontrolling Interest | Adjustment | Adjusted Balance | Total |
Beginning balance at Dec. 31, 2021 | $ 24,400 | $ 24,400 | $ 4 | $ 4 | $ (937) | $ (937) | $ 224,786 | $ 224,786 | $ (267,831) | $ 267,831 | $ 11,057 | $ 11,057 | $ (43,041) | $ 259,310 | $ 302,351 | |||
Preferred stock repurchase and dividends | $ (172) | (31) | (203) | |||||||||||||||
Distributions to joint venture partner | 316 | (1,539) | (1,223) | |||||||||||||||
Net (loss) income | (13,601) | 628 | (12,973) | |||||||||||||||
Other comprehensive income (loss) | (1,562) | (145) | (1,707) | |||||||||||||||
Ending balance at Mar. 31, 2022 | 24,400 | $ 4 | (2,499) | 211,329 | 9,970 | 243,204 | ||||||||||||
Beginning balance at Dec. 31, 2022 | 24,400 | (2,576) | $ 327,614 | 10,446 | 359,884 | |||||||||||||
Preferred stock repurchase and dividends | $ (24,400) | (50,129) | (24) | (74,553) | ||||||||||||||
Issuance of post-merger earnout shares | 4 | 34,996 | 35,000 | |||||||||||||||
Distributions to joint venture partner | (110) | (110) | ||||||||||||||||
Net (loss) income | $ (4,664) | 398 | (4,266) | |||||||||||||||
Other comprehensive income (loss) | 504 | 2 | 506 | |||||||||||||||
Ending balance at Mar. 31, 2023 | $ 24,400 | $ 4 | $ 4 | $ 8 | $ (2,576) | $ (2,072) | $ 284,569 | $ 284,569 | $ 269,436 | $ (4,664) | $ (327,614) | $ 10,446 | $ 10,712 | $ (43,041) | $ 316,843 | $ 273,420 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Cash flows from operating activities: | ||
Net loss | $ (4,266) | $ (12,973) |
Adjustments to reconcile net income to net cash used in operating activities | ||
Depreciation and amortization | 8,560 | 11,667 |
Deferred taxes | (514) | 63 |
Change in fair value of earnout liability | 2,936 | |
Gain on sale of assets | (967) | (251) |
Foreign currency remeasurement gain | (5) | (156) |
Earnings from equity method investments | (3,242) | (765) |
TZC investment present value accretion | (603) | (580) |
Loss (gain) on trading securities, net | 32 | (280) |
Changes in assets and liabilities: | ||
Accounts receivable | (49,278) | (19,363) |
Contract assets | (30,306) | (3,029) |
Prepaid expenses and other current assets | 119 | 2,602 |
ROU assets | (1,764) | (2,371) |
Accounts payable and accrued expenses | 33,705 | 786 |
Contract liabilities | 7,241 | (12,247) |
Operating lease liabilities | 1,820 | 2,347 |
Other | 1,753 | (3,137) |
Net cash used in operating activities | (34,779) | (37,687) |
Cash flows from investing activities: | ||
Purchase of fixed assets | (1,166) | (714) |
Proceeds from sale of fixed assets | 1,295 | 521 |
Purchase of trading securities | (81) | |
Proceeds from the sale of trading securities | 357 | |
Capital contribution to investees | (1,000) | |
Net cash provided by (used in) investing activities | 48 | (836) |
Cash flows from financing activities: | ||
Borrowings on line of credit | 3,000 | 30,000 |
Borrowings on notes payable | 181 | 115 |
Payments on notes payable | (12,382) | (10,367) |
Advances from related parties | (493) | (247) |
Payments to related parties | 6 | 1,252 |
Payments on finance lease | (1,189) | (2,088) |
Distributions | (110) | (1,542) |
Proceeds from merger of Legato II and Southland Holdings, LLC | 17,088 | |
Net cash provided by financing activities | 6,101 | 17,123 |
Effect of exchange rate on cash | 190 | (401) |
Net decrease in cash and cash equivalents and restricted cash | (28,440) | (21,801) |
Beginning of period | 71,991 | 111,242 |
End of period | 43,551 | 89,441 |
Supplemental cash flow information | ||
Cash paid for income taxes | 87 | 421 |
Cash paid for interest | 3,230 | 5,415 |
Non-cash investing and financing activities: | ||
Lease assets obtained in exchange for new leases | 6,416 | $ 6,894 |
Assets obtained in exchange for notes payable | 2,299 | |
Issuance of post-merger earn out shares | 35,000 | |
Dividend financed with notes payable | $ 50,000 |
Description of Business
Description of Business | 3 Months Ended |
Mar. 31, 2023 | |
Description of Business | |
Description of Business | Note 1. Overview Southland Holdings, Inc. (“Southland”) is a diverse leader in specialty infrastructure construction with roots dating back to 1900. The end markets for which we provide services cover a broad spectrum of specialty services within infrastructure construction. We design and construct projects in the bridges, tunnels, communications, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipelines end markets. Southland is based in Grapevine, Texas. It is the parent company of Johnson Bros. Corporation, American Bridge Holding Company (“American Bridge”), Oscar Renda Contracting, Southland Contracting, Mole Constructors, Heritage Materials and other affiliates. With the combined capabilities of these six primary subsidiaries and their affiliates, Southland has become a diversified industry leader with both public and private customers. The majority of our customers are located in the United States. Merger As previously announced, on May 25, 2022, Legato Merger Corp. II, a Delaware corporation (“Legato II”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Legato Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Legato II (“Merger Sub”), and Southland Holdings LLC, a Texas limited liability company (“Southland LLC”). On February 14, 2023 (the “Closing Date”), as contemplated by the Merger Agreement, Merger Sub merged with and into Southland LLC, with Southland LLC surviving the merger as a wholly owned subsidiary of Legato II (the “Merger”). The transactions contemplated by the Merger Agreement are referred to herein collectively as the “Business Combination.” In connection with the Business Combination, Legato II changed its name to “Southland Holdings, Inc.” The Merger was accounted for as a reverse recapitalization with Southland as the accounting acquirer and Legato II as the acquired company for accounting purposes. Accordingly, all historical financial information presented in the unaudited condensed consolidated financial statements represents the accounts of Southland and its subsidiaries as if Southland had been the predecessor Company. The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued. As such, reporting periods prior to the three months ended March 31, 2023 will not present share or per share data. COVID-19 Considerations Certain impacts to public health conditions particular to the coronavirus (“COVID-19”) outbreak have had a significant negative impact on our operations and profitability. The continuing extent of the impact to our financial performance will depend on future developments, including (i) the duration and spread of the outbreak, (ii) the restrictions and advisories, (iii) the effects on the financial markets, and (iv) the effects on the economy overall, all of which are highly uncertain and cannot be predicted. If our financial performance is impacted because of these developments for an extended period, our results may be materially adversely affected. We cannot anticipate how the potential widespread distribution of a vaccine will mitigate this impact on either COVID-19 or on future variants of the disease. |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2023 | |
Basis of Presentation | |
Basis of Presentation | 2. Basis of Presentation Consolidated U.S. GAAP Presentation These interim unaudited condensed consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“GAAP”). The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) contains guidance that form GAAP. New guidance is released via Accounting Standards Update (“ASU”). The unaudited condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report. The accompanying balance sheet and related disclosures as of December 31, 2022, have been derived from the 8-K/A filed on March 22, 2023. The Company’s financial condition as of March 31, 2023, and operating results for the three months ended March 31, 2023, are not necessarily indicative of the financial conditions and results of operations that may be expected for any future interim period or for the year ended December 31, 2023. The unaudited condensed consolidated financial statements include the accounts of Southland Holdings, Inc., and our majority-owned and controlled subsidiaries and affiliates. All significant intercompany transactions are eliminated within the consolidations process. Investments in non-construction related partnerships and less-than-majority owned subsidiaries that we do not control, but where we have significant influence are accounted for under the equity method. Certain construction related joint ventures and partnerships that we do not control, nor do we have significant influence are accounted for under the equity method for the balance sheet and the proportionate consolidation method for the statement of operations. Reclassification Certain previously reported amounts have been reclassified to conform to the current period presentation. These presentation changes did not impact the Company’s consolidated net income, consolidated cash flows, total assets, total liabilities or total equity. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management periodically evaluates estimates used in the preparation of the consolidated financial statements for continued reasonableness. It is reasonably possible that changes may occur in the near term that would affect our estimates with respect to the input method, the allowance for credit losses, recoverability of unapproved contract modifications, deferred tax assets, and other accounts for which estimates are required. Cash, Cash Equivalents, and Restricted Cash We consider all highly liquid instruments purchased with a maturity of three months or less as cash equivalents. We maintain our cash in accounts at certain financial institutions. The majority of our balances exceed federally insured limits. We have not experienced any losses in these accounts, and we do not believe they are exposed to any significant credit risk. Restricted cash and cash equivalents consist of amounts held in accounts in our name at certain financial institutions. These accounts are subject to certain control provisions in favor of various surety and insurance companies for purposes of compliance and security perfections. (Amounts in thousands) March 31, 2023 December 31, 2022 Cash and cash equivalents at beginning of period $ 57,915 $ 63,342 Restricted cash at beginning of period 14,076 47,900 Cash, cash equivalents, and restricted cash at beginning of period $ 71,991 $ 111,242 Cash and cash equivalents at end of period $ 28,930 $ 57,915 Restricted cash at end of period 14,621 14,076 Cash, cash equivalents, and restricted cash at end of period $ 43,551 $ 71,991 Goodwill and Intangibles Goodwill and indefinite-life intangibles are tested for impairment annually in the fourth quarter, or more frequently if events or circumstances indicate that goodwill or indefinite-lived intangibles may be impaired. We evaluate goodwill at the reporting unit level (operating segment or one level below an operating segment). We identify our reporting unit and determine the carrying value of the reporting unit by assigning the assets and liabilities, including the existing goodwill and indefinite-lived intangibles, to the reporting unit. Our reporting units are based on our organizational and reporting structure. We currently identify three reporting units. We begin with a qualitative assessment using inputs based on our business, our industry, and overall macroeconomic factors. If our qualitative assessment deems that the fair value of a reporting unit is more likely than not less than its carrying amount, we then complete a quantitative assessment to determine the fair value of the reporting unit and compare it to the carrying amount of the reporting unit. During the three month periods ended March 31, 2023 and 2022, there was no impairment recorded. Long-Lived Assets We review long-lived assets, including finite-lived intangible assets subject to amortization, for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the asset or group of assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to the future net cash flows expected to be generated by the asset or group of assets. If such assets are not considered to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the three month periods ended March 31, 2023 and 2022, we did not identify any triggering events that would require a quantitative assessment. Accounts Receivable, Net We provide an allowance for credit losses, which is based upon a review of outstanding receivables, historical collection information, existing economic conditions, and future expectations. Normal contracts receivable are typically due within 10-30 days after the issuance of the invoice and may vary by customer. Retainages are due after completion of the project and acceptance by the contract owner. We may be able to negotiate release of some retainages upon meeting certain milestones. Warranty retainage receivables are due after the expiration of the warranty period, if applicable. Receivables past due more than 120 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluations and specific circumstances of the customer. As of March 31, 2023, and December 31, 2022, we had an allowance for credit losses of $1.5 million. Recently Adopted Accounting Pronouncements In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Update 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. We adopted Topic 848 as of January 1, 2021. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected optional expedients for and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022. Our adoption of Update 2020-04 did not have a material impact on our consolidated financial statements and related disclosures. We no longer have any debt that references LIBOR. In June 2016, FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, (“Topic 326”). The standard requires the immediate recognition of estimated credit losses expected to occur over the life of financial assets rather than the current incurred loss impairment model that recognizes losses when a probability threshold is met. Topic 326 is effective for annual periods beginning after January 1, 2023, and interim periods within those fiscal years. The implementation of Topic 326 in 2023 did not have a material impact on our consolidated financial statements given the nature of our contracts and our historical loss experience. Significant Accounting Policies The significant accounting policies followed by the Company are set forth in Note 2 to the 8-K/A filed on March 22, 2023, and contained elsewhere herein, other than the policy for warrants, which is included below. For the three months ended March 31, 2023, there were no significant changes in our use of estimates or significant accounting policies. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. The Company has concluded that the Public Warrants and Private Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment. |
Recapitalization
Recapitalization | 3 Months Ended |
Mar. 31, 2023 | |
Recapitalization | |
Recapitalization | 3. Recapitalization As discussed in Note 1 – Description of Business, on the Closing Date, the Company issued 33,793,111 shares of Common Stock to the former members of Southland (“Southland Members”) in exchange for their membership interests in Southland (“Southland Membership Interests”). Southland received net proceeds of $17.1 million. Transaction costs of $9.9 million directly related to the Merger, are included in additional paid-in capital in the condensed consolidated balance sheet as of March 31, 2023. Prior to the Merger, Southland LLC declared a $50.0 million dividend to be payable to Southland Members, which is recorded in other noncurrent liabilities on the condensed consolidated balance sheets. Southland Members, in lieu of cash payment, agreed to receive a promissory note for payment in the future. The notes have a four-year term and accrue interest at 7.0% . Southland, at its discretion, may make interim interest and principal payments during the term. Immediately after giving effect to the Business Combination, there were 44,407,831 shares of Common Stock and 14,385,500 warrants, each exercisable for a share of Common Stock at an exercise price of $11.50 per share (including public and private placement warrants) (“Warrants”), outstanding. The Merger was accounted for as a reverse recapitalization with Southland as the accounting acquirer and Legato II as the acquired company for accounting purposes. Accordingly, all historical financial information presented in the unaudited condensed consolidated financial statements represents the accounts of Southland and its subsidiaries as if Southland had been the predecessor company. The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued. As such, reporting periods prior to the three months ended March 31, 2023 will not present share or per share data. Earnout Shares shares |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2023 | |
Fair Value Measurements | |
Fair Value Measurements | 4. Fair Value Measurements Fair value of investments measured on a recurring basis as of March 31, 2023, and December 31, 2022, were as follows: As of March 31, 2023 (Amounts in thousands) Fair Value Level 1 Level 2 Level 3 Marketable Securities Common Stocks $ — $ — $ — $ — Total — — — — Investments Noncurrent Private Equity 3,319 — — 3,319 Total noncurrent 3,319 — — 3,319 Overall Total $ 3,319 $ — $ — $ 3,319 As of December 31, 2022 (Amounts in thousands) Fair Value Level 1 Level 2 Level 3 Marketable Securities Common Stocks $ 8 $ 8 $ — $ — Total 8 8 — — Investments Noncurrent Private Equity 3,261 — — 3,261 Total noncurrent 3,261 — — 3,261 Overall Total $ 3,269 $ 8 $ — $ 3,261 |
Revenue
Revenue | 3 Months Ended |
Mar. 31, 2023 | |
Revenue | |
Revenue | 5. Revenue Revenue is recognized over time using the input method in accordance with ASC 606, measured by the percentage of cost incurred to date to estimated total cost for each contract. This method is used because we believe expended cost to be the best available measure of progress on contracts. Our contracts are primarily in the form of firm fixed-price and fixed-price per unit. A large portion of our contracts have scope defined adequately, which allows us to estimate total contract value upon the signing of a new contract. Upon signing a new contract, we allocate the total consideration across various contractual promises to transfer a distinct good or service to a customer. These are grouped into specific performance obligations. This process requires significant management judgement. Most of our contracts have a single performance obligation. For contracts with multiple performance obligations, we allocate the total transaction price based on the estimated standalone selling price, which is the total project costs plus a budgeted margin percentage, for each of the performance obligations. Revenue is recognized when, or as, the performance obligations are satisfied. Our contracts do not include a significant financing component. Costs to obtain contracts are generally not significant and are expensed in the period incurred. Estimating cost to complete of long-term contracts involves a significant amount of estimation and judgement. For long-term contracts, we use the calculated transaction price, estimated cost to complete the project, and the total costs incurred on the project to date to calculate the percentage of the project that is complete. The costs to complete the project and the transaction price can change due to unforeseen events that can either increase or decrease the margin on a particular project. Our contract structure allows for variable consideration. A significant portion of this variable consideration comes in the form of change order requests and claims. Other variable consideration can include volume discounts, performance bonuses, incentives, liquidated damages, and other terms that can either raise or lower the total transaction price. We estimate variable consideration based on the probability of being entitled to collection of specific amounts. We include amounts that we believe we have an enforceable right to collect based on our probability of success with specific claims or contractual rights. Our estimates of total variable consideration rely on all available information about our customer including historical, current, and forecasted information. Many of our contracts require contract modifications resulting from a change in contract scope or requirements. Change orders are issued to document changes to the original contract. We can have approved and unapproved change orders. Unapproved change orders are contract modifications for which we or our customers have not agreed to terms, scope and price. Contract modifications are necessary for many reasons, including but not limited to, changes to the contract specifications or design from the customer, modification to the original scope, changes to engineering drawings, or other required deviation from the original construction plan. Contract modifications may also be necessary for reasons including, but not limited to, other changes to the contract which may be out of our control, such as rain or other weather delays, incomplete, insufficient, inaccurate engineering drawings, different site conditions from information made available during the estimating process, or other reasons. An unapproved change order may turn into a formal claim if we cannot come to an agreement with the owner but are contractually entitled to recovery of costs and profits for work performed. Costs incurred related to contract modifications are included in the estimated costs to complete and are treated as project costs when incurred. Unless the contract modification is distinct from the other goods and services included within the project, the contract modification is accounted for as part of the existing contract. The effect of any modifications on the transaction price, and our measure of the percentage-of-completion on specific performance obligations for which the contract modification relates, is recognized as a cumulative catch-up adjustment to revenue recognized. In some cases, contract modifications may not be fully settled until after the completion of work as specified in the original contract. We review and update our contract estimates regularly. Any adjustments in estimated profit on contracts is recognized under the cumulative catch-up method. Under this method, the cumulative impact of the profit adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods are then recognized using an updated estimate that uses inputs consisting of the remaining transaction price, the remaining contract term, and the remaining costs to be incurred on the project. If a contract is deemed to be in a loss position, the projected loss is recognized in full, including any previously recognized margin, in the period in which the change in estimate is made. Losses are recognized as an accrued loss provision on the consolidated balance sheets in the accrued liabilities caption. For contract revenue after the date that the loss is accrued, the accrued loss provision is adjusted so that the gross profit for the contract remains zero in future periods, subject to future adjustments to the overall expected profit or loss as determined at such time. As of March 31, 2023, and March 31, 2022, we have $90.8 million and $203.5 million, respectively, of unapproved contract modifications included within our various projects’ transaction prices. These modifications are in negotiation with our customers or other third parties. We estimate the likelihood of collection during the bidding process for new contracts. Customers with history of late or non-payment are avoided in the bidding process. We consider the necessity for write-down of receivable balances in conjunction with GAAP when evaluating our estimates of transaction price and estimated costs to complete our projects. We bill our customers in conjunction with our contract terms. Our contracts have three main categories, (i) contracts that are billed based on a specific timeline, (ii) contracts that are billed upon the completion of certain phases of work, or milestones, and (iii) contracts that are billed as services are provided. Some of our contracts are billed following the recognition of certain revenue. This creates an asset on our consolidated balance sheets captioned “contract assets.” Other contracts schedules allow us to bill customers prior to recognizing revenue. These contracts create a liability on our consolidated balance sheets captioned “contract liabilities.” We segregate our business into two reportable segments: Transportation and Civil. Our Chief Operating Decision Maker (“CODM”) uses these segments in order to operate the business. Our segments offer different specialty infrastructure services. Our CODM regularly reviews our operating and financial performance based on these segments. Each of our reportable segments is composed of similar business units that specialize in specialty infrastructure projects that are unique. Our business is managed using revenue and gross profit primarily. Our CODM regularly uses this information to review operating results, plan future bids, allocate resources, target customers, and plan future growth and capital allocations. To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs, and indirect operating expenses, were made. Our Civil segment is comprised of Oscar Renda Contracting, Inc., Mole Constructors, Inc., Southland Contracting, Inc., Southland Holdings, LLC, Renda Pacific, LLC, Southland Renda JV, Southland RE Properties, Oscar Renda Contracting Canada, Southland Mole of Canada, Southland Technicore Mole joint venture, and Southland Astaldi joint venture. This segment focuses on projects that include the design and construction of water pipeline, pump stations, lift stations, water and wastewater treatment plants, concrete and structural steel, outfall, and tunneling. Our Transportation segment is comprised of American Bridge, Heritage Materials, LLC, and Johnson Bros. Corporation. This segment operates throughout North America and specializes in services that include the design and construction of bridges, roadways, marine, dredging, ship terminals, and piers, and specialty structures and facilities. Total assets by segment is not presented as our CODM, as defined by ASC 280, does not review or allocate resources based on segment assets. We do not have material intersegment revenue or gross profit. Joint ventures are classified into the segment with which the projects align. Segment Revenue Revenue by segment for the three months ended March 31, 2023, and March 31, 2022, was as follows: Three Months Ended (Amounts in thousands) March 31, 2023 March 31, 2022 % of Total % of Total Segment Revenue Revenue Revenue Revenue Civil $ 72,989 26.6 % $ 75,043 29.0 % Transportation 201,840 73.4 % 183,443 71.0 % Total revenue $ 274,829 100.0 % $ 258,486 100.0 % Segment Gross Profit Gross profit by segment for the three months ended March 31, 2023, and March 31, 2022, was as follows: Three Months Ended (Amounts in thousands) March 31, 2023 March 31, 2022 % of Segment % of Segment Segment Gross Profit Revenue Gross Profit Revenue Civil $ 8,766 12.0 % $ 6,967 9.3 % Transportation 10,177 5.0 % (2,036) (1.1) % Gross profit $ 18,943 6.9 % $ 4,931 1.9 % Revenue earned outside of the United States was 23% and 15% for the three months ended March 31, 2023, and March 31, 2022. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2023 | |
Debt | |
Debt | 6. Debt Long-term debt and credit facilities consist of the following as of March 31, 2023, and December 31, 2022: As of (Amounts in thousands) March 31, 2023 December 31, 2022 Secured notes $ 196,757 $ 177,914 Mortgage notes 852 901 Revolving credit facility 98,000 95,000 Equipment notes 8 31 Total debt 295,617 273,846 Unamortized deferred financing costs (230) (246) Total debt, net 295,387 273,600 Current portion 52,718 46,322 Total long-term debt $ 242,669 227,278 The weighted average interest rate on total debt outstanding as of March 31, 2023, was 4.4%. As of March 31, 2023, and December 31, 2022, we were in compliance with all debt covenants. Revolving Credit Facility In July 2021, we entered into a revolving credit agreement with Frost Bank for $50.0 million. As of December 31, 2022, the revolving credit facility agreement had been amended and increased to $100.0 million. The revolving credit facility agreement bears interest on drawn balances at 1-month SOFR, subject to a floor of 0.90%, plus an applicable margin rate of 2.10%. As of March 31, 2023, $98.0 million was drawn on the revolver, and we had $2.0 million available. Secured Notes We enter secured notes in order to finance growth within our business. As of March 31, 2023, we had secured notes expiring between November 2023 and March 2033. Interest rates on the secured notes range between 1.29% and 8.00%. Mortgage Notes We enter mortgage notes in order to finance growth within our business. As of March 31, 2023, we had mortgage notes expiring between October 2023 and February 2029. Interest rates on the mortgage notes range between 3.84% and 5.99%. The mortgage notes are collateralized by certain real estate owned by Southland. Equipment OEM Notes We enter equipment notes in order to complete certain specialty construction projects. As of March 31, 2023, we had equipment notes expiring in April 2023. As of March 31, 2023, there is no interest rate on any of our equipment notes. The equipment OEM notes are collateralized by certain equipment owned by Southland. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 7. Commitments and Contingencies Litigation In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the outcomes of which cannot be predicted with certainty. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes of which cannot be predicted with certainty. Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances, our government contracts could be terminated, we could be suspended or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceeding, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed. Accordingly, it is possible that future developments in such proceedings and inquiries could require us to (i) adjust existing accruals, or (ii) record new accruals that we did not originally believe to be probable or that could not be reasonably estimated. Such changes could be material to our financial condition, results of operations, and/or cash flows in any particular reporting period. In addition to matters that are considered probable for which the loss can be reasonably estimated, disclosure is also provided when it is reasonably possible and estimable that a loss will be incurred, when it is reasonably possible that the amount of a loss will exceed the amount recorded, or a loss is probable but the loss cannot be estimated. Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded on the consolidated balance sheets. A certain number of the claims are insured but subject to varying deductibles, and a certain number of the claims are uninsured. The aggregate range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies was immaterial, as of March 31, 2023, and December 31, 2022. Our estimates of such matters could change in future periods. Surety Bonds We, as a condition for entering into a substantial portion of our construction contracts, had outstanding surety bonds as of March 31, 2023, and December 31, 2022. We have agreed to indemnify the surety if the surety experiences a loss on the bonds of any of our affiliates. Self- Insurance We are self-insured up to certain limits with respect to workers’ compensation, and general liability and vehicle liability matters, and health insurance. We maintain accruals for self-insurance retentions based upon third-party data and claims history. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2023 | |
Income Taxes | |
Income Taxes | 8. Income Taxes Prior to the Merger, Southland LLC, and various domestic subsidiaries, elected to be taxed as an S-corporation, under the provisions of Subchapter S of the Internal Revenue Code. As such, their respective earnings were not subject to entity level income tax, but instead, the owners were liable for federal income taxes on their respective shares of the applicable income. American Bridge and Oscar Renda, two domestic subsidiaries of Southland LLC, had historically been taxed as a C-corporation and their income subject to entity-level tax. Following the transaction on February 14, 2023, Southland LLC, along with various domestic subsidiaries, elected to voluntarily revoke their S-corporation status effective January 1, 2023. As a result, Southland LLC, and their domestic subsidiaries, will elect to file a consolidated corporate income tax return for the 2023 calendar year. The federal statutory tax rate is 21%. Southland’s effective tax rate was negative 69.75% for the three months ended March 31, 2023. The primary difference between the statutory rate and the Company’s effective rate was due to the pre-tax loss and the change in the U.S consolidated filing structure effective January 1, 2023, as a result of the Merger. This change in filing structure required recording deferred tax assets and liabilities related to entities previously not subject to income tax with $5.0 million being recorded to income tax expense for the three months ended March, 31 2023. As the Merger did not require acquisition accounting under U.S. GAAP, the recording of these deferred tax assets and liabilities was recorded to current operations in accordance with the requirements under ASC 740. Additionally, $1.1 million was recorded to income tax expense as of March 31, 2023 due to the change in the state effective tax rate applied to both American Bridge and Oscar Renda deferred tax assets and liabilities. Lastly, as a result of the new U.S. consolidated filing structure, Southland is in a net deferred tax liability position for both federal and state income tax. As a result the U.S. and state deferred tax assets are considered to be more-likely-than-not realizable, and therefore a valuation allowance is not deemed necessary. The previously recorded valuation allowance related to American Bridge federal and state net deferred tax assets has been removed resulting with a benefit to income tax of $3.8 million recorded in the three months ended March 31, 2023. Southland LLC’s effective tax rate was negative 11.54% for the three months ended March 31, 2022. The primary differences between the statutory rate and the effective rate were due to state income taxes and a valuation allowance recorded on American Bridge’s U.S. and state net deferred tax assets, offset with inclusion of earnings from certain filing entities being taxed as pass-through entities and a lower effective rate on overall foreign earnings. |
Remaining Unsatisfied Performan
Remaining Unsatisfied Performance Obligations | 3 Months Ended |
Mar. 31, 2023 | |
Remaining Unsatisfied Performance Obligations | |
Remaining Unsatisfied Performance Obligations | 9. Remaining Unsatisfied Performance Obligations Remaining Unsatisfied Performance Obligations (“RUPO”) consists of two components: (1) unearned revenue and (2) awarded but not started. Unearned revenue includes the revenue we expect to record in the future on in-progress contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts. Contracts that are awarded, but not yet started, are included in RUPO once a contract has been fully executed and/or we have received formal “Notice to Proceed” from the project owner. Although RUPO reflects business that we consider to be firm, deferrals, cancellations and/or scope adjustments may occur. RUPO is adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. Fixed price contracts, particularly with federal, state and local government customers, are expected to continue to represent a majority of our total RUPO. The following schedule shows the RUPO as of March 31, 2023, and March 31, 2022: Three Months Ended (Amounts in millions) March 31, 2023 March 31, 2022 Remaining Unsatisfied Performance Obligations $ 2,862 $ 1,999 The Company expects to recognize approximately 45% of its RUPOs as revenue |
Cost and Estimated Earnings on
Cost and Estimated Earnings on Uncompleted Contracts | 3 Months Ended |
Mar. 31, 2023 | |
Cost and Estimated Earnings on Uncompleted Contracts | |
Cost and Estimated Earnings on Uncompleted Contracts | 10. Cost and Estimated Earnings on Uncompleted Contracts Contract assets as of March 31, 2023, and December 31, 2022, consisted of the following: As of (Amounts in thousands) March 31, 2023 December 31, 2022 Costs in excess of billings $ 512,377 $ 480,825 Costs to fulfill contracts, net 30,770 32,081 Contract assets $ 543,147 $ 512,906 Costs and estimated earnings on uncompleted contracts were as follows as of March 31, 2023, and December 31, 2022: As of (Amounts in thousands) March 31, 2023 December 31, 2022 Costs incurred on uncompleted contracts $ 6,961,030 $ 6,874,709 Estimated earnings 449,162 398,917 Costs incurred and estimated earnings 7,410,192 7,273,626 Less: billings to date (7,036,615) (6,924,358) Costs to fulfill contracts, net 30,770 32,081 Net contract position $ 404,347 $ 381,349 Our net contract position is included on the condensed consolidated balance sheets under the following captions: As of (Amounts in thousands) March 31, 2023 December 31, 2022 Contract assets $ 543,147 $ 512,906 Contract liabilities (138,800) (131,557) Net contract position $ 404,347 $ 381,349 As of March 31, 2023, and December 31, 2022, we have recorded $309.4 million and $260.8 million, respectively, related to claims. The classification of these amounts are represented on the consolidated balance sheets as of March 31, 2023, and December 31, 2022, as follows: (Amounts in thousands) March 31, 2023 December 31, 2022 Costs in excess of billings $ 204,749 $ 156,127 Investments 104,697 104,643 Claims asset total $ 309,446 $ 260,770 On January 1, 2022, we had contract liabilities of $111.3 million, of which $58.8 million was recognized as revenue during the three months ended March 31, 2022. On January 1, 2023, we had contract liabilities of $131.6 million, of which $74.2 million was recognized as revenue during the three months ended March 31, 2023. |
Noncontrolling Interests Holder
Noncontrolling Interests Holders | 3 Months Ended |
Mar. 31, 2023 | |
Noncontrolling Interests Holders | |
Noncontrolling Interests Holders | 11. Noncontrolling Interests Holders Southland has several controlling interests including both joint ventures and partnerships. We have controlling interests and allocate earnings and losses in those entities to the noncontrolling interest holders based on their ownership percentages. We own an 84.7% interest in Oscar Renda Contracting, Inc. (“Oscar Renda”), as of March 31, 2023, and March 31, 2022. We own a 65.0% interest in the Southland Technicore Mole joint venture and a 70.0% interest in the Southland Astaldi joint venture as of March 31, 2023, and March 31, 2022. We consolidated each of Oscar Renda Contracting of Canada, Southland Technicore Mole joint venture, and Southland Astaldi joint venture as a result of our significant influence and ownership percentage over the joint venture operations. We have fully consolidated revenue, cost of construction, and other costs on our unaudited condensed consolidated statements of operations and balances on the unaudited condensed consolidated balance sheets. |
Earnings (Loss) per Share
Earnings (Loss) per Share | 3 Months Ended |
Mar. 31, 2023 | |
Earnings (Loss) per Share | |
Earnings (Loss) per Share | 12. Earnings (Loss) per Share Basic and diluted net loss per share for the three months ended March 31, 2023 consisted of the following ( in thousands, except shares and per share amounts Three months ended March 31, 2023 (1) Numerator: Net loss $ (4,266) Less net income attributable to noncontrolling interests 398 Net loss attributable to common stockholders, basic and diluted (4,664) Denominator: Weighted average common shares outstanding — basic and diluted 44,407,831 Basic and diluted net loss per share $ (0.11) (1) The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued. As such, reporting periods prior to the three months ended March 31, 2023 will not present share or per share data. The following table discloses weighted-average securities that were not included in the computation of diluted net loss per share as their inclusion would have been anti-dilutive: Three months ended March 31, 2023 Common stock public and private warrants 14,385,502 Contingent earn-out shares 6,896,566 Equity incentive plan shares 2,220,392 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2023 | |
Subsequent Events | |
Subsequent Events | 13. Subsequent Events On April 27, 2023, Southland issued 3,448,283 shares of common stock to the Southland Members pursuant to meeting certain 2022 targets outlined in the Merger Agreement. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
Basis of Presentation | |
Consolidated U.S. GAAP Presentation | Consolidated U.S. GAAP Presentation These interim unaudited condensed consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“GAAP”). The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) contains guidance that form GAAP. New guidance is released via Accounting Standards Update (“ASU”). The unaudited condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report. The accompanying balance sheet and related disclosures as of December 31, 2022, have been derived from the 8-K/A filed on March 22, 2023. The Company’s financial condition as of March 31, 2023, and operating results for the three months ended March 31, 2023, are not necessarily indicative of the financial conditions and results of operations that may be expected for any future interim period or for the year ended December 31, 2023. The unaudited condensed consolidated financial statements include the accounts of Southland Holdings, Inc., and our majority-owned and controlled subsidiaries and affiliates. All significant intercompany transactions are eliminated within the consolidations process. Investments in non-construction related partnerships and less-than-majority owned subsidiaries that we do not control, but where we have significant influence are accounted for under the equity method. Certain construction related joint ventures and partnerships that we do not control, nor do we have significant influence are accounted for under the equity method for the balance sheet and the proportionate consolidation method for the statement of operations. |
Reclassification | Reclassification Certain previously reported amounts have been reclassified to conform to the current period presentation. These presentation changes did not impact the Company’s consolidated net income, consolidated cash flows, total assets, total liabilities or total equity. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management periodically evaluates estimates used in the preparation of the consolidated financial statements for continued reasonableness. It is reasonably possible that changes may occur in the near term that would affect our estimates with respect to the input method, the allowance for credit losses, recoverability of unapproved contract modifications, deferred tax assets, and other accounts for which estimates are required. |
Cash, Cash Equivalents, and Restricted Cash | Cash, Cash Equivalents, and Restricted Cash We consider all highly liquid instruments purchased with a maturity of three months or less as cash equivalents. We maintain our cash in accounts at certain financial institutions. The majority of our balances exceed federally insured limits. We have not experienced any losses in these accounts, and we do not believe they are exposed to any significant credit risk. Restricted cash and cash equivalents consist of amounts held in accounts in our name at certain financial institutions. These accounts are subject to certain control provisions in favor of various surety and insurance companies for purposes of compliance and security perfections. (Amounts in thousands) March 31, 2023 December 31, 2022 Cash and cash equivalents at beginning of period $ 57,915 $ 63,342 Restricted cash at beginning of period 14,076 47,900 Cash, cash equivalents, and restricted cash at beginning of period $ 71,991 $ 111,242 Cash and cash equivalents at end of period $ 28,930 $ 57,915 Restricted cash at end of period 14,621 14,076 Cash, cash equivalents, and restricted cash at end of period $ 43,551 $ 71,991 |
Goodwill and Intangibles | Goodwill and Intangibles Goodwill and indefinite-life intangibles are tested for impairment annually in the fourth quarter, or more frequently if events or circumstances indicate that goodwill or indefinite-lived intangibles may be impaired. We evaluate goodwill at the reporting unit level (operating segment or one level below an operating segment). We identify our reporting unit and determine the carrying value of the reporting unit by assigning the assets and liabilities, including the existing goodwill and indefinite-lived intangibles, to the reporting unit. Our reporting units are based on our organizational and reporting structure. We currently identify three reporting units. We begin with a qualitative assessment using inputs based on our business, our industry, and overall macroeconomic factors. If our qualitative assessment deems that the fair value of a reporting unit is more likely than not less than its carrying amount, we then complete a quantitative assessment to determine the fair value of the reporting unit and compare it to the carrying amount of the reporting unit. During the three month periods ended March 31, 2023 and 2022, there was no impairment recorded. |
Long-Lived Assets | Long-Lived Assets We review long-lived assets, including finite-lived intangible assets subject to amortization, for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the asset or group of assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to the future net cash flows expected to be generated by the asset or group of assets. If such assets are not considered to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the three month periods ended March 31, 2023 and 2022, we did not identify any triggering events that would require a quantitative assessment. |
Accounts Receivable, Net | Accounts Receivable, Net We provide an allowance for credit losses, which is based upon a review of outstanding receivables, historical collection information, existing economic conditions, and future expectations. Normal contracts receivable are typically due within 10-30 days after the issuance of the invoice and may vary by customer. Retainages are due after completion of the project and acceptance by the contract owner. We may be able to negotiate release of some retainages upon meeting certain milestones. Warranty retainage receivables are due after the expiration of the warranty period, if applicable. Receivables past due more than 120 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluations and specific circumstances of the customer. As of March 31, 2023, and December 31, 2022, we had an allowance for credit losses of $1.5 million. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Update 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. We adopted Topic 848 as of January 1, 2021. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected optional expedients for and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022. Our adoption of Update 2020-04 did not have a material impact on our consolidated financial statements and related disclosures. We no longer have any debt that references LIBOR. In June 2016, FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, (“Topic 326”). The standard requires the immediate recognition of estimated credit losses expected to occur over the life of financial assets rather than the current incurred loss impairment model that recognizes losses when a probability threshold is met. Topic 326 is effective for annual periods beginning after January 1, 2023, and interim periods within those fiscal years. The implementation of Topic 326 in 2023 did not have a material impact on our consolidated financial statements given the nature of our contracts and our historical loss experience. |
Significant Accounting Policies | Significant Accounting Policies The significant accounting policies followed by the Company are set forth in Note 2 to the 8-K/A filed on March 22, 2023, and contained elsewhere herein, other than the policy for warrants, which is included below. For the three months ended March 31, 2023, there were no significant changes in our use of estimates or significant accounting policies. |
Warrants | Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. The Company has concluded that the Public Warrants and Private Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Basis of Presentation | |
Schedule of cash, cash equivalents, and restricted cash | (Amounts in thousands) March 31, 2023 December 31, 2022 Cash and cash equivalents at beginning of period $ 57,915 $ 63,342 Restricted cash at beginning of period 14,076 47,900 Cash, cash equivalents, and restricted cash at beginning of period $ 71,991 $ 111,242 Cash and cash equivalents at end of period $ 28,930 $ 57,915 Restricted cash at end of period 14,621 14,076 Cash, cash equivalents, and restricted cash at end of period $ 43,551 $ 71,991 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Fair Value Measurements | |
Schedule of Fair value, assets measured on recurring basis | As of March 31, 2023 (Amounts in thousands) Fair Value Level 1 Level 2 Level 3 Marketable Securities Common Stocks $ — $ — $ — $ — Total — — — — Investments Noncurrent Private Equity 3,319 — — 3,319 Total noncurrent 3,319 — — 3,319 Overall Total $ 3,319 $ — $ — $ 3,319 As of December 31, 2022 (Amounts in thousands) Fair Value Level 1 Level 2 Level 3 Marketable Securities Common Stocks $ 8 $ 8 $ — $ — Total 8 8 — — Investments Noncurrent Private Equity 3,261 — — 3,261 Total noncurrent 3,261 — — 3,261 Overall Total $ 3,269 $ 8 $ — $ 3,261 |
Revenue (Tables)
Revenue (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Revenue | |
Schedule of revenue by segment | Three Months Ended (Amounts in thousands) March 31, 2023 March 31, 2022 % of Total % of Total Segment Revenue Revenue Revenue Revenue Civil $ 72,989 26.6 % $ 75,043 29.0 % Transportation 201,840 73.4 % 183,443 71.0 % Total revenue $ 274,829 100.0 % $ 258,486 100.0 % |
Schedule of gross profit by segment | Three Months Ended (Amounts in thousands) March 31, 2023 March 31, 2022 % of Segment % of Segment Segment Gross Profit Revenue Gross Profit Revenue Civil $ 8,766 12.0 % $ 6,967 9.3 % Transportation 10,177 5.0 % (2,036) (1.1) % Gross profit $ 18,943 6.9 % $ 4,931 1.9 % |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Debt | |
Schedule of long term debt | As of (Amounts in thousands) March 31, 2023 December 31, 2022 Secured notes $ 196,757 $ 177,914 Mortgage notes 852 901 Revolving credit facility 98,000 95,000 Equipment notes 8 31 Total debt 295,617 273,846 Unamortized deferred financing costs (230) (246) Total debt, net 295,387 273,600 Current portion 52,718 46,322 Total long-term debt $ 242,669 227,278 |
Remaining Unsatisfied Perform_2
Remaining Unsatisfied Performance Obligations (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Remaining Unsatisfied Performance Obligations | |
Schedule of remaining unsatisfied performance obligations | Three Months Ended (Amounts in millions) March 31, 2023 March 31, 2022 Remaining Unsatisfied Performance Obligations $ 2,862 $ 1,999 |
Cost and Estimated Earnings o_2
Cost and Estimated Earnings on Uncompleted Contracts (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Cost and Estimated Earnings on Uncompleted Contracts | |
Schedule of contract assets | As of (Amounts in thousands) March 31, 2023 December 31, 2022 Costs in excess of billings $ 512,377 $ 480,825 Costs to fulfill contracts, net 30,770 32,081 Contract assets $ 543,147 $ 512,906 |
Schedule of costs and estimated earnings on uncompleted contracts | As of (Amounts in thousands) March 31, 2023 December 31, 2022 Costs incurred on uncompleted contracts $ 6,961,030 $ 6,874,709 Estimated earnings 449,162 398,917 Costs incurred and estimated earnings 7,410,192 7,273,626 Less: billings to date (7,036,615) (6,924,358) Costs to fulfill contracts, net 30,770 32,081 Net contract position $ 404,347 $ 381,349 |
Schedule of net contract position | As of (Amounts in thousands) March 31, 2023 December 31, 2022 Contract assets $ 543,147 $ 512,906 Contract liabilities (138,800) (131,557) Net contract position $ 404,347 $ 381,349 |
Schedule of condensed consolidated balance sheets | (Amounts in thousands) March 31, 2023 December 31, 2022 Costs in excess of billings $ 204,749 $ 156,127 Investments 104,697 104,643 Claims asset total $ 309,446 $ 260,770 |
Earnings (Loss) per Share (Tabl
Earnings (Loss) per Share (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Earnings (Loss) per Share | |
Schedule of earnings per share basic and diluted | Basic and diluted net loss per share for the three months ended March 31, 2023 consisted of the following ( in thousands, except shares and per share amounts Three months ended March 31, 2023 (1) Numerator: Net loss $ (4,266) Less net income attributable to noncontrolling interests 398 Net loss attributable to common stockholders, basic and diluted (4,664) Denominator: Weighted average common shares outstanding — basic and diluted 44,407,831 Basic and diluted net loss per share $ (0.11) (1) The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued. As such, reporting periods prior to the three months ended March 31, 2023 will not present share or per share data. |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] | Three months ended March 31, 2023 Common stock public and private warrants 14,385,502 Contingent earn-out shares 6,896,566 Equity incentive plan shares 2,220,392 |
Description of Business - Narra
Description of Business - Narrative (Details) | Mar. 31, 2023 subsidiary | Feb. 14, 2023 shares |
Description of Business | ||
Number of subsidiaries | subsidiary | 6 | |
Common stock, shares issued in merger | shares | 0 |
Basis of Presentation - Cash, C
Basis of Presentation - Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 | Mar. 31, 2022 |
Basis of Presentation | |||
Cash and cash equivalents at beginning of period | $ 57,915 | $ 63,342 | |
Restricted cash at beginning of period | 14,076 | 47,900 | |
Beginning of period | 71,991 | $ 89,441 | 111,242 |
Cash and cash equivalents at end of period | 28,930 | 57,915 | |
Restricted cash at end of period | 14,621 | 14,076 | |
End of period | $ 43,551 | $ 71,991 | $ 89,441 |
Basis of Presentation - Narrati
Basis of Presentation - Narrative (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 USD ($) item | Dec. 31, 2022 USD ($) | |
Basis of Presentation | ||
Number of reporting units | item | 3 | |
Impairment of intangible assets | $ 0 | |
Impairment of goodwill | 0 | |
Allowance for credit losses | $ 1,500 | $ 1,500 |
Recapitalization (Details)
Recapitalization (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | ||||
Feb. 14, 2023 | Feb. 13, 2023 | Mar. 31, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | |
Shares issued to former members | 33,793,111 | ||||
Net proceeds received | $ 17.1 | ||||
Dividend payable to members | $ 50 | ||||
Transaction costs | $ 9.9 | ||||
Common stock, shares outstanding | 44,407,831 | ||||
Warrants outstanding | 14,385,500 | ||||
Exercise price (in dollars per share) | $ 11.50 | ||||
Common stock, shares issued in merger | 0 | ||||
Shares for attaining certain performance targets | 10,344,828 | ||||
Earnout liabilities | $ 23.6 | ||||
Shares issued as earnout liability settled | 3,448,283 | ||||
Promissory note | |||||
Notes expiration term | 4 years | ||||
Interest rate (as a percentage) | 7% | ||||
Forecast | |||||
Shares for attaining certain performance targets | 10,344,828 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - Recurring - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Fair Value Measurements | ||
Marketable Securities | $ 8 | |
Investments Noncurrent | $ 3,319 | 3,261 |
Overall Total | 3,319 | 3,269 |
Common Stocks | ||
Fair Value Measurements | ||
Marketable Securities | 8 | |
Private equity | ||
Fair Value Measurements | ||
Investments Noncurrent | 3,319 | 3,261 |
Level 1 | ||
Fair Value Measurements | ||
Marketable Securities | 8 | |
Overall Total | 8 | |
Level 1 | Common Stocks | ||
Fair Value Measurements | ||
Marketable Securities | 8 | |
Level 3 | ||
Fair Value Measurements | ||
Investments Noncurrent | 3,319 | 3,261 |
Overall Total | 3,319 | 3,261 |
Level 3 | Private equity | ||
Fair Value Measurements | ||
Investments Noncurrent | $ 3,319 | $ 3,261 |
Revenue - Segment Revenue (Deta
Revenue - Segment Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Revenue | ||
Revenue | $ 274,829 | $ 258,486 |
% of Total Revenue | 100% | 100% |
Civil | ||
Revenue | ||
Revenue | $ 72,989 | $ 75,043 |
% of Total Revenue | 26.60% | 29% |
Transportation | ||
Revenue | ||
Revenue | $ 201,840 | $ 183,443 |
% of Total Revenue | 73.40% | 71% |
Revenue - Segment Gross Profit
Revenue - Segment Gross Profit (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Revenue | ||
Gross Profit | $ 18,943 | $ 4,931 |
% of Segment Revenue | 6.90% | 1.90% |
Civil | ||
Revenue | ||
Gross Profit | $ 8,766 | $ 6,967 |
% of Segment Revenue | 12% | 9.30% |
Transportation | ||
Revenue | ||
Gross Profit | $ 10,177 | $ (2,036) |
% of Segment Revenue | 5% | (1.10%) |
Revenue - Narrative (Details)
Revenue - Narrative (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2023 USD ($) segment | Mar. 31, 2022 USD ($) | |
Revenue | ||
Contract modifications | $ | $ 90.8 | $ 203.5 |
Number of reportable segments | segment | 2 | |
Revenue earned | 23% | 15% |
Debt - Components (Details)
Debt - Components (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Debt | ||
Total debt | $ 295,617 | $ 273,846 |
Unamortized deferred financing costs | (230) | (246) |
Total debt, net | 295,387 | 273,600 |
Current portion | 52,718 | 46,322 |
Total long-term debt | 242,669 | 227,278 |
Secured notes | ||
Debt | ||
Total debt | 196,757 | 177,914 |
Mortgage notes | ||
Debt | ||
Total debt | 852 | 901 |
Revolving credit facility | ||
Debt | ||
Total debt | 98,000 | 95,000 |
Equipment notes | ||
Debt | ||
Total debt | $ 8 | $ 31 |
Debt - Narrative (Details)
Debt - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Mar. 31, 2023 | Jul. 31, 2021 | |
Debt | |||
Weighted average interest rate | 4.40% | ||
Revolving credit facility | |||
Debt | |||
Maximum available under facility | $ 100 | $ 50 | |
Revolving credit facility | $ 98 | ||
Available for borrowing | $ 2 | ||
Revolving credit facility | SOFR | |||
Debt | |||
Margin rate | 2.10% | ||
Revolving credit facility | SOFR | Minimum | |||
Debt | |||
Line of credit interest rate | 0.90% | ||
Secured notes | Minimum | |||
Debt | |||
Interest rate (as a percentage) | 1.29% | ||
Secured notes | Maximum | |||
Debt | |||
Interest rate (as a percentage) | 8% | ||
Mortgage notes | Minimum | |||
Debt | |||
Interest rate (as a percentage) | 3.84% | ||
Mortgage notes | Maximum | |||
Debt | |||
Interest rate (as a percentage) | 5.99% | ||
Equipment notes | |||
Debt | |||
Interest rate (as a percentage) | 0% |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2023 USD ($) subsidiary | Mar. 31, 2022 | Dec. 31, 2022 USD ($) | |
Income Taxes | |||
Number of subsidiaries historically taxed as C-corporation | subsidiary | 2 | ||
Federal statutory tax rate | 21% | ||
Effective tax rate | (69.75%) | (11.54%) | |
Increase in deferred tax assets and liabilities | $ 5,000 | ||
State income taxes - net of federal benefit | 1,100 | ||
U.S. and state net deferred tax assets | 3,800 | ||
Deferred tax liabilities | $ 2,878 | $ 3,392 |
Remaining Unsatisfied Perform_3
Remaining Unsatisfied Performance Obligations (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Remaining Unsatisfied Performance Obligations | ||
Percentage of consolidated joint venture contracts | 100% | |
Remaining Unsatisfied Performance Obligations | $ 2,862 | $ 1,999 |
Percentage of revenue expects to recognize | 100% | 100% |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01 | ||
Remaining Unsatisfied Performance Obligations | ||
Percentage of revenue expects to recognize | 45% | |
Expected timing of satisfaction | 12 months |
Cost and Estimated Earnings o_3
Cost and Estimated Earnings on Uncompleted Contracts - Contract assets (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Cost and Estimated Earnings on Uncompleted Contracts | ||
Costs in excess of billings | $ 512,377 | $ 480,825 |
Costs to fulfill contracts, net | 30,770 | 32,081 |
Contract assets | $ 543,147 | $ 512,906 |
Cost and Estimated Earnings o_4
Cost and Estimated Earnings on Uncompleted Contracts - Costs and estimated earnings (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Cost and Estimated Earnings on Uncompleted Contracts | ||
Costs incurred on uncompleted contracts | $ 6,961,030 | $ 6,874,709 |
Estimated earnings | 449,162 | 398,917 |
Costs incurred and estimated earnings | 7,410,192 | 7,273,626 |
Less: billings to date | (7,036,615) | (6,924,358) |
Costs to fulfill contracts, net | 30,770 | 32,081 |
Net contract position | $ 404,347 | $ 381,349 |
Cost and Estimated Earnings o_5
Cost and Estimated Earnings on Uncompleted Contracts - Net contract position (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Jan. 01, 2023 | Dec. 31, 2022 | Jan. 01, 2022 |
Cost and Estimated Earnings on Uncompleted Contracts | ||||
Contract assets | $ 543,147 | $ 512,906 | ||
Contract liabilities | (138,800) | $ (131,600) | (131,557) | $ (111,300) |
Net contract position | $ 404,347 | $ 381,349 |
Cost and Estimated Earnings o_6
Cost and Estimated Earnings on Uncompleted Contracts - Consolidated balance sheets (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Cost and Estimated Earnings on Uncompleted Contracts | ||
Costs in excess of billings | $ 204,749 | $ 156,127 |
Investments | 104,697 | 104,643 |
Claims asset total | $ 309,446 | $ 260,770 |
Cost and Estimated Earnings o_7
Cost and Estimated Earnings on Uncompleted Contracts - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
Mar. 31, 2023 | Mar. 31, 2022 | Jan. 01, 2023 | Dec. 31, 2022 | Jan. 01, 2022 | |
Cost and Estimated Earnings on Uncompleted Contracts | |||||
Claims | $ 309,400 | $ 260,800 | |||
Contract liabilities | 138,800 | $ 131,600 | $ 131,557 | $ 111,300 | |
Contract revenue recognized | $ 74,200 | $ 58,800 |
Noncontrolling Interests Hold_2
Noncontrolling Interests Holders - Narrative (Details) | Mar. 31, 2023 | Mar. 31, 2022 |
Oscar Renda | ||
Noncontrolling Interests Holders | ||
Noncontrolling Interests | 84.70% | 84.70% |
Southland Technicore Mole | ||
Noncontrolling Interests Holders | ||
Noncontrolling Interests | 65% | 65% |
Southland Astaldi | ||
Noncontrolling Interests Holders | ||
Noncontrolling Interests | 70% | 70% |
Earnings (Loss) per Share - Bas
Earnings (Loss) per Share - Basic and diluted net loss per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |||
Mar. 31, 2023 | Mar. 31, 2022 | Feb. 14, 2023 | ||
Numerator: | ||||
Net loss | $ (4,266) | $ (12,973) | ||
Net income attributable to noncontrolling interests | 398 | $ 628 | ||
Net Income (Loss) Available to Common Stockholders, Basic | (4,664) | |||
Net Income (Loss) Available to Common Stockholders, Diluted | $ (4,664) | |||
Weighted average shares outstanding | ||||
Weighted average common shares outstanding - basic (in shares) | [1] | 44,407,831 | ||
Weighted average common shares outstanding - diluted (in shares) | [1] | 44,407,831 | ||
Basic net loss per share (in dollars per shares) | [1] | $ (0.11) | ||
Diluted net loss per share (in dollars per shares) | [1] | $ (0.11) | ||
Common stock, shares issued in merger | 0 | |||
[1] The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued. As such, reporting periods prior to the three months ended March 31, 2023 will not present share or per share data. |
Earnings (Loss) per Share - Com
Earnings (Loss) per Share - Computation of diluted net loss per antidilutive (Details) | 3 Months Ended |
Mar. 31, 2023 shares | |
Common stock public and private warrants | |
Basic and Diluted Net Loss Per Share | |
Antidilutive securities excluded from computation of earnings per share, amount | 14,385,502 |
Contingent earn-out shares | |
Basic and Diluted Net Loss Per Share | |
Antidilutive securities excluded from computation of earnings per share, amount | 6,896,566 |
Equity incentive plan shares | |
Basic and Diluted Net Loss Per Share | |
Antidilutive securities excluded from computation of earnings per share, amount | 2,220,392 |
Subsequent Events (Details)
Subsequent Events (Details) | Apr. 27, 2023 shares |
Subsequent Events | |
Subsequent Events | |
Stock issued during period (in shares) | 3,448,283 |