Financial Data and Key Metrics - Revenue for Q2 2024 was 252million,downfrom257 million in Q2 2023 [4] - Gross loss for Q2 2024 was 40million,comparedto34 million in Q2 2023 [4] - Operating cash flow was strong at 27millioninQ22024[4]−NetlossforQ22024was46 million, or 0.96pershare,comparedtoanetlossof13 million, or 0.27pershare,inQ22023[16]−AdjustedEBITDAforQ22024wasnegative49.9 million, compared to negative 42.2millioninQ22023[17]BusinessLinePerformance−Civilsegmentrevenueincreasedto79 million in Q2 2024, up from 65millioninQ22023,withgrossprofitmarginimprovingto12172 million in Q2 2024, down from 191millioninQ22023,withgrossprofitmarginworseningtonegative299 million in revenue but had a gross loss of 47millionduetounfavorableadjustmentsfromdisputesettlements[19]MarketandBacklogData−BacklogattheendofQ22024was2.74 billion, up from 2.64billioninQ12024[8]−NewawardsinQ22024totaled375 million, including the 202millionBullRunFiltrationFacilityand150 million in water resource projects [8] - The company was selected for phase 2 of the North End Treatment Plant in Winnipeg, with an expected construction contract value of 220million[9]StrategicDirectionandIndustryCompetition−Thecompanyisfocusingonresolvinglegacydisputestostrengthenthebalancesheetandgeneratecash[5][6]−Alternativedeliverycontracts,suchasprogressivedesignbuilds,arebecomingmoreprevalent,andthecompanyiswell−positionedtocapitalizeontheseopportunitiesduetoitstechnicalexpertiseandcompetitiveadvantage[10][11]−TheEPA′supdatedCleanWaterInfrastructureNeedssurveyestimates630 billion will be needed over the next 20 years to address water quality objectives, presenting significant opportunities for the company [11][12] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the core business and the ability to capitalize on opportunities from the IIJA (Infrastructure Investment and Jobs Act) [13][14] - The company expects to generate significant cash from resolving legacy disputes and strong performance in core business projects in the coming quarters [6][14] Other Important Information - The company closed a 42.5millionrealestatetransactioninJuly2024,resultingin16 million of debt reduction and 25millionincashforgeneralcorporatepurposes[7]−AdebtrefinancingtransactionisexpectedtobefinalizedbeforeQ32024resultsareannounced,whichwillrefinanceapproximately110 million of existing debt [21] Q&A Session Summary Question: When will the Civil segment backlog start flowing into revenue? - Revenue from the Civil segment is expected to increase in Q3 and Q4 2024, with backlog up 38% year-over-year [23][24] Question: How will the remaining Materials & Paving backlog be recognized? - The remaining 200 million in Materials & Paving backlog will be heavily weighted towards Q3 and Q4 2024, with some projects trailing into 2025 [25] Question: What is the potential for more dispute settlements in the coming quarters? - The company expects to generate significant cash from ongoing dispute settlements, with approximately half of the CIE balance related to substantially completed projects [27] Question: How many projects are involved in the disputed contracts? - The company has a handful of claims related to its legacy portfolio, with the CityLYNX project being one of the larger claims [29][30] Question: What is the outlook for organic growth excluding legacy disputes? - The company expects strong organic growth driven by the IIJA and healthy market conditions, with the Civil segment backlog up 38% [33][34] Question: What are the chances of contract disputes being settled in 2025 instead of 2024? - Most claims are from projects bid in 2018 and 2019, and the company is working to resolve them as quickly as possible [37] Question: Why was the revenue from Materials & Paving only 9 million in Q2 2024? - The settlement resulted in a derecognition of revenue from prior periods, but operational progress remains on track for substantial completion by mid-2025 [38] Question: How will the 110millionrefinancingaffectGAAPinterestexpense?−Therefinancingisexpectedtosupportworkingcapitalbetter,butdetailswillbeprovidedoncethetransactionisfinalized[40]Question:DidweatherimpactQ2orearlyQ3performance?−Higher−than−normalraineventsimpactedsomework,butnosignificantweather−relatedissueswerenotedforJuly[41]Question:Whatistheproformabalancesheetpositionafterrecenttransactions?−Therealestatetransactionanddisputesettlementshavestrengthenedthebalancesheet,with25 million in net proceeds and $16 million in debt reduction [43] Question: What are the remaining risks in executing the Materials & Paving backlog? - Risks include change orders, weather, and inflation, but the company expects to collect on recorded claims and sees potential cash upside [45][47]
Southland (SLND)2024-08-13 16:55