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Southland (SLND) - 2024 Q3 - Earnings Call Transcript
SLNDSouthland (SLND)2024-11-13 19:35
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Financial Data and Key Metrics Changes - Revenue for Q3 2024 was 173million,downfrom173 million, down from 312 million in the same period in 2023, primarily due to legacy headwinds and impacts from hurricanes [26][28] - Gross loss for the quarter was 51million,comparedtoagrossprofitof51 million, compared to a gross profit of 30 million in Q3 2023, resulting in a gross profit margin of negative 30% [28][31] - Net loss reported was 55millionornegative55 million or negative 1.14 per share, compared to net income of 4millionor4 million or 0.08 per share in the same period last year [31] - EBITDA for the quarter was negative 59million,comparedtopositive59 million, compared to positive 22 million in Q3 2023 [31] Business Line Data and Key Metrics Changes - Civil segment revenues were 56million,adecreaseof56 million, a decrease of 35 million from the same period in 2023, with a gross loss of 18million[32]−Transportationsegmentrevenueswere18 million [32] - Transportation segment revenues were 117 million, down 104millionfromthesameperiodin2023,withagrosslossof104 million from the same period in 2023, with a gross loss of 33 million [33][34] - Unfavorable charges of 27millionfromlegacycivilprojectsand27 million from legacy civil projects and 44 million from materials and paving and legacy projects significantly impacted both segments [32][34] Market Data and Key Metrics Changes - The company ended the quarter with a total backlog of 2.74billion,essentiallyflatfromthepreviousquarterandupfrom2.74 billion, essentially flat from the previous quarter and up from 2.54 billion at the end of Q3 2023 [15] - Approximately 180 million of remaining M&P backlog and 105 million of non-M&P legacy backlog are expected to be substantially complete by the end of 2025 [10][12] Company Strategy and Development Direction - The company is focusing on securing smaller dollar, shorter duration projects that yield quick cash flow, targeting projects in the 30millionto30 million to 150 million range [17][66] - The strategic plan includes a shift away from the M&P business to focus on core markets, with a backlog of 2.5billioninnewcoreprojects[12][66]−Thecompanyisexperiencingsustaineddemandacrosscoremarkets,withinfrastructureconstructionservicesdemandoutpacingthesupplyofqualifiedcontractors[16]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutthestrongperformanceofnewcoreprojects,whichareexpectedtoreturnthecompanytoprofitabilityin2025[12][22]−Thecompanyanticipatessignificantcashinflowsfromtheresolutionofdisputesandchangeordersrelatedtolegacyprojects,contributingtofuturecashgeneration[35][41]−ManagementacknowledgedthechallengesfacedinQ3butemphasizedtherobustpipelineofopportunitiesandtheexpectationofarecoveryinQ4andinto2025[54][60]OtherImportantInformation−Thecompanycloseda2.5 billion in new core projects [12][66] - The company is experiencing sustained demand across core markets, with infrastructure construction services demand outpacing the supply of qualified contractors [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strong performance of new core projects, which are expected to return the company to profitability in 2025 [12][22] - The company anticipates significant cash inflows from the resolution of disputes and change orders related to legacy projects, contributing to future cash generation [35][41] - Management acknowledged the challenges faced in Q3 but emphasized the robust pipeline of opportunities and the expectation of a recovery in Q4 and into 2025 [54][60] Other Important Information - The company closed a 160 million senior secured term loan facility, extending debt maturities to 2028 and strengthening the balance sheet [14][35] - The company achieved several operational milestones, including significant safety achievements on projects [23] Q&A Session Summary Question: What is the time frame for the 105 million of non-M&P legacy backlog to burn off? - Management expects it to be substantially complete by the end of 2025, with one project extending into 2026 [37] Question: What was the revenue impact from the non-cash unfavorable adjustments in the quarter? - Approximately 71 million was a decrease in recognized revenue due to cumulative catch-up impacts of percentage completion accounting [38] Question: How does the company plan to allocate resources between smaller quick-turn projects and larger projects? - Management aims for a balance, maximizing resources to ensure the highest returns possible [39][40] Question: What is the expected timing of additional claims settlements? - Significant cash flows are expected from settlements as owners are running out of abilities to delay payments [41] Question: Can you provide history on the non-M&P legacy business? - The majority of the work performed well, but legacy projects overshadowed results due to cumulative catch-up effects [44] Question: What is the capacity to add more business given the current backlog? - The company is extremely selective, focusing on projects that maximize returns, with a strong cash position to support this [46][48] Question: How should backlog conversion be expected in Q4? - A recovery in volume is anticipated in Q4, with expectations of a sequential recovery in top line numbers [60][61] Question: How should the cadence of the $180 million M&P revenue be modeled? - A straight line model is not recommended; there will be variability in project completions [62] Question: What risk mitigation processes are being implemented for shorter duration projects? - The company has overhauled its procurement process to cover risk points effectively [68][69]