Southland Holdings’ Earnings Call: Mixed Sentiments and Future Prospects

Southland Holdings, Inc. ((SLND)) has held its Q3 earnings call. Read on for the main highlights of the call.

Southland Holdings, Inc.’s recent earnings call revealed a mixed sentiment, highlighting both significant achievements and ongoing challenges. The company reported notable improvements in revenue and gross profit margins, driven by strong performance in the Civil segment and a positive market outlook. However, these gains were tempered by substantial net losses and increased interest expenses, with legacy project challenges continuing to impact financial results.

Completion of Legacy Projects

Southland Holdings marked a significant operational milestone by achieving substantial completion on the last of 27 highly technical projects from the acquisition of American Bridge Company. This achievement underscores the company’s commitment to overcoming legacy project challenges and enhancing operational efficiency.

Revenue Increase

The company reported a third-quarter revenue increase to $213.3 million, up $40 million from the same period in 2024. This growth reflects Southland’s ability to capitalize on market opportunities and strengthen its financial position.

Improved Gross Profit Margin

Southland’s gross profit margin improved significantly to 1.5% from a negative 29.5% in the prior year. This improvement was driven by strong performance in core work, showcasing the company’s focus on enhancing profitability.

Civil Segment Performance

The Civil segment demonstrated robust growth, with revenue increasing to $99.5 million from $55.8 million in 2024 and achieving a gross margin of 10.5%. This performance highlights the segment’s contribution to the company’s overall success.

Strong Backlog and New Awards

Southland added approximately $151 million in new awards and contract adjustments, bringing its total backlog to approximately $2.26 billion. This strong backlog positions the company well for future growth and stability.

Positive Market Outlook

The company expressed optimism about the continued strong demand for infrastructure projects, with significant opportunities in both public and private markets. This positive market outlook bodes well for Southland’s future prospects.

Net Loss for the Quarter

Despite the positive developments, Southland reported a net loss of $75.2 million or $1.39 per share, compared to a net loss of $54.7 million or $1.14 per share in the same period last year. This underscores the financial challenges the company continues to face.

Interest Expense Increase

Interest expenses rose to $9.2 million, up $1.6 million from the prior year, primarily due to higher interest rates. This increase in expenses adds to the financial pressures on the company.

One-time Noncash Tax Expense

The income tax expense included a $57.3 million one-time noncash expense from a valuation allowance on net deferred tax assets, further impacting the company’s financial results.

Legacy Project Challenges

The transportation segment experienced a gross loss of $7.2 million, with a negative gross margin of 6.3% due to legacy project impacts. These challenges continue to affect the company’s financial performance.

Forward-Looking Guidance

Southland’s guidance for the future remains optimistic, with expectations of strong demand for infrastructure projects driven by public and private sector interests. The company anticipates resolving remaining legacy project disputes and aims to enhance its earnings profile by focusing on high-margin core projects in the coming years.

In conclusion, Southland Holdings, Inc.’s earnings call presented a balanced view of achievements and challenges. While the company has made significant strides in revenue growth and margin improvement, it continues to grapple with financial hurdles such as net losses and increased expenses. The positive market outlook and strategic focus on high-margin projects provide a hopeful path forward for the company.