SLND Q3 2026 earnings call transcript, November 13, 2026

we will also refer to non-GAAP financial measures and you will find reconciliations in the press release relating to this conference call, which can be found on the Investor's Relation. with that, I will now turn the call over to Frank.

Good morning and thank you for joining Southland's third quarter 2026 conference call. Before we review the quarter, I'd like to highlight some recent operational successes from our teams. Our Johnson Brothers team was recognized with two 2026 ENR Southeast Best Projects awards in the highway bridge category. Our Jupiter Federal Bridge replacement project in Jupiter Florida was named best project and our Kirkman Road extension in Orlando Florida received an award of merit. Congratulations to both project teams on this well-deserved recognition. Turning to the overall business, I'll start with an update on our capital structure and review our third quarter results. Then I will discuss recent awards and the opportunities we see ahead in our markets. In the third quarter, we executed the financial assistance agreement. And the second amendment to our term loan facility, which formalized the support our securities have been providing. As we discussed on our last call, a portion of the non-bonding financing provided under the financial assistance agreement. Is expected to convert into senior non-voting preferred shares. The preferred shares will have perpetual maturity and are not convertible into any other securities of the company. We have extended the. date for issuing the preferred shares to December 18th. And we continue to work closely with the sureties on finalizing the conversion. The sureties continued support reflects confidence in our plan and our execution. And that exit.

started to show in our results this quarter. Third quarter revenue was $234 million. And gross profit was $21 million or 9% of revenue. The quarter's performance was driven by our civil segment, which produced a 13% gross margin led by strong results on a data center project and a wastewater treatment plant project in the Southwest. We produced net income of $34 million in the quarter. driven by stronger operational performance, lower SG&A expense, a lower interest rate under our amended term loan, and the Washington State Convention Center Settlement, which Keith will discuss in more. detail. This is an important step, but we still have work ahead as we execute our plan as part of our larger plan. We continue to focus on bidding with discipline on new high margin opportunities that align with our core. We finished the quarter with $1.71 billion of backlog, up from $1.68 billion at the end of the second quarter. With the financing agreement in place, our bidding activity picked up this quarter. And we began converting those opportunities into awards. In the third quarter, new awards were approximately $271 million. This was led by the 100. $196 million phase three Winnipeg North end sewage treatment plant and a $71 million water pipeline project in the Southwest. The market backdrop across our core end markets also remains positive. State and local infrastructure funding continues to translate into active procurement for water, bridge, marine, and tunnel work. At the federal level, the surface transportation authorization under the Infrastructure Investment and Jobs Act

expired at the end of September, and Congress extended certain programs through December 11th while it works on a longer-term reauthorization. The timing of a new bill remains uncertain, but a significant portion of IIJA funding has yet to be spent and should continue. to support state and local programs over the next several years. We are encouraged by the bipartisan support for reauthorization, and we believe the funding environment for our core markets remains healthy. We also continue to see strong demand for data center projects, which give us additional strong margin work for our crews, which complements our core water, bridge, marine, and tunnel markets. Over the longer term, we believe that that diversity of end markets positions us more. well to adapt as market demand shifts. This morning, we announced a $34 million tunnel project award in the Southwest, along with additional data center work in the mid-Atlantic. in the Southwest. The work in the Southwest is on an existing side of a data center project we announced earlier this year. The final contract value on the data center awards will depend on the amount of work. as directed by the customer. We expect these to start as short duration, strong margin projects that can grow in scope over time. We are also completing a pre-construction contract with a major cruise facility client. in the Caribbean with the intent to negotiate a progressive design build contract in the coming months. We also have several outstanding bids, including two data center opportunities, a water resource opportunity in the South.

West, two bridge projects in the Southeast, several marine opportunities in the Caribbean, the MoDOT Liberty Bend Bridge design build in Missouri, and the Claiborne Pell Bridge rehab in Rhode Island. We expect to hear back on these pursuits in the coming months. Additional opportunities in our pipeline include the outer bridge crossing repairs for the Port Authority of New York and New Jersey, the Veterans Drive Contract. 2 project in St. Thomas, the GE Booth Outfall Tunnel for the Region of Peel, a transmission pipeline in North Dakota, the Marine Creek Sanitary Sewer Interceptor for the City of Fort Worth, Brook Hall. Hollow Interceptor for Dallas Water Utilities and Duckebush Restoration Project for the U.S. Army Corps of Engineers. We're also tracking multiple bridge dehumidification rehab projects, including the Bronx Whiteside. Stone Bridge, Throgs Neck Bridge, San Francisco Oakland Bay Bridge and the Claiborne Pell and multiple other water tunnel marine and bridge opportunities across our core markets. The pipeline remains strong and we expect to win our fair share of. Upcoming opportunities. To summarize, we are starting to see positive momentum in the business. We delivered a profitable third quarter and booked strong new awards. Growing our backlog to 1.71 billion. Demand in our core markets with both public and private clients remains strong. We are awaiting decisions on multiple outstanding bids across our end markets that could convert into new awards in the coming months. We are encouraged by this progress, but there is more to do.

Our near-term priorities remain completing the preferred share issuance, finishing our remaining legacy projects, collecting on money we are owed on outstanding disputes, and continuing to convert our pipeline into profitable. New awards. With that, I'll turn the call over to Keith for financial updates.

Other income net was $32.4 million, compared to $2 million in the prior year period. This included a $28.7 million gain on the extinguishment of a surety payable. from our settlement with one of our surety partners related to the Washington State Convention Center judgment. Interest expense in the quarter total $4.1 million, a decrease of $5.1 million, or $55. compared to the same period in 2025. The decrease was primarily driven by a $2.8 million adjustment to previously recorded interest expense because the lower interest rate under the Second Amendment applies retroactively to March 17th of this year. On a go forward, we expect interest expense to be approximately $6 million per quarter. We recorded tax expense. Expense of $0.5 million for the quarter compared to $57.2 million in the same period last year, which reflected the valuation allowance we recorded against our domestic deferred tax assets in the third quarter of 2020.

Net income attributable to Southland stockholders in the third quarter was $33.7 million, or $0.62 per diluted share, compared to a net loss of $75.3 million. Or a loss of $1.39 per diluted share in the third quarter of 2025. EBITDA in the third quarter was $43.2 million, compared to a negative $3.5 million. in the third quarter of 2025. This quarter's EBITDA includes the $28.7 million gain on the Washington State Convention Center settlement we discussed earlier. Now to touch on segment performance. Our civil segment had... revenue of $107.3 million compared to $99.5 million in the same period in 2025. Civil had a gross profit of $14.3 million or a 13.3% margin compared to a gross profit of $10.4 million. or a 10.5% margin in the prior year period. The increase was driven primarily by a data center project and a wastewater treatment plant in the Southwest, partially offset by lower contributions from a water project in the Midwest that is approached. Our transportation segment had revenue of $126.4 million compared to $113.9 million in the same period in 2025. Transportation had gross profit $6.3 million or a 5% margin compared to a gross loss of $8.5 million or a negative 7.4% margin in the same period in the prior year. The improvement was driven primarily by bridge projects in the Southeast and the Midwest and two dam projects in the South, partially offset by a decrease from a materials and paving project.

The materials and paving business line contributed $17.4 million in revenue and a gross loss of $10.2 million in the quarter, compared to revenue of $22.9 million and a gross loss of $3 million in the same period of 2025. We were bound to... $21 million of materials and paving backlog from $46 million last quarter and $27.4 million of non-M&P legacy backlog from $35 million.

We finished the quarter with approximately $1.71 billion of backlog, compared to $1.68 billion at June 30th. We expect to recognize approximately 40% of our backlog as revenue over the next 12 months. Turning to liquidity, we ended the quarter with cash and cash equivalents of $35.9 million, and total cash, including restricted cash, of $46.8 million, compared to $45.7 million at the end. of the second quarter. During the quarter, our surety partners advanced approximately $25 million to support ongoing project performance. At quarter end, total surety financing under the financial assistance agreement was $233.9 million made up of $65.3 million of bonding surety financing and $168.6 million of non-bonding financing. With the financial assistance agreement executed we reclassified $209.8 million from surety payables to debt. We expect at least $151 million of the non-bonding financing to convert. into preferred shares reducing debt. Under an amendment to the financial assistance agreement the preferred shares are now required to be issued by December 18th of this year.

We're going to monetize non-core equipment and real estate generating approximately $13.1 million of proceeds through the first nine months of the year and expect to further reduce debt in the coming quarters with these initiatives.

Separately, a shorty payable balance related to the Washington State Convention Center judgment was $55.4 million at quarter-end, compared to $89.1 million at June 30th. This reflects the $28.7 million gain on... ...extinguishment of shorty payable and the $5 million payment we made under the settlement previously announced. We remain in negotiation with a shorty partner that funded the remaining amount, and they have agreed not to seek repayment... ...until at least November 13th, 2027. On September 23rd, we received notice from the NYSE American that we were not in compliance with its continued listing... ...standards for stockholders' equity. On October 22nd, we submitted our plan to regain compliance by the March 23rd, 2028 deadline. The plan is under review by the Exchange. ...converting a portion of our surety financing into preferred shares, resolving our remaining legacy surety obligations, and continued profitable execution are the foundation of that plan. Consistent with what we have done, we will be able to do a lot of work in the future. We communicated on our last call, our focus remains on closing out our legacy work, improving the balance sheet through asset monetization and our shorty partnership and executing our core business in the markets and geographies where our margins are the strongest amount.

Your first question comes from the line of Julio Romero with Sudoti. Your line is open. Please go ahead.