Q1 2024 Southland Holdings Inc Earnings Call
Okay.
Operator: Good morning, my name is Chloe, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southland First Quarter 2024 Earnings Conference Call. All lights have been placed on mute to prevent any background noise.
Speaker Change: Good morning, My name is clearly and I'll be your conference operator today at this time I would like to welcome everyone to the South Glens first quarter 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star followed by number two. Thank you. Alex, you may begin your conference.
Speaker Change: A question and answer session.
Speaker Change: I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please.
Speaker Change: The star followed by number. Thank you Alex you May begin your conference.
Alex: Good morning, everyone and welcome to the South of the first quarter 2024 conference call.
Alex Murray: Good morning, everyone, and welcome to the Southland First Quarter 2024 conference call. This is Alex Murray, Director of Corporate Development and Investor Relations. Joining me today are Frank Renda, President and Chief Executive Officer, and Cody Gallarda, Executive Vice President and Chief Financial Officer. Before I begin, I'd like to remind everyone that this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933. Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.
Alex: This is Alex Murray director of corporate development and Investor Relations joining.
Joining me today are Frank <unk>, President and Chief Executive Officer, <unk>, <unk> Executive Vice President and Chief Financial Officer.
Alex Murray: Forward-looking statements are neither historical facts nor assurances of future performance. Forward-looking statements are uncertain and outside of Southland's control. Southland's actual results and financial condition may differ materially from those projected in forward-looking statements. Therefore, you should not rely on any of these forward-looking statements, and we do not undertake any duty to update these statements. For a discussion of some of the risks that could affect results, please see the risk factor section of our Form 10-K for the year ended December 31st, 2023, that was filed with the SEC on March 4th, 2024, and the discussion on Form 10-Q for the quarter ended March 31st, 2024, that was filed with the SEC last night.
Speaker Change: Before we begin I'd like to remind everyone that this conference call may contain forward looking statements within the meaning of section 27 of the Securities Act of 1933 fixed.
Speaker Change: Section 21 E of.
Speaker Change: The Securities Exchange Act of 1934 in the private Securities Litigation Reform Act of 1995.
Speaker Change: Forward looking statements are neither historical facts nor.
Speaker Change: <unk> future performance.
Speaker Change: Forward looking statements are uncertain and outside of <unk> control.
Speaker Change: <unk> actual results and financial condition may differ materially from those projected in forward looking statements.
Speaker Change: Therefore, you should not rely on any of these forward looking statements and we do not undertake any duty to update these statements.
Speaker Change: For a discussion of some of the risks that could affect results. Please see the risk factors section of our Form 10-K for the year ended December 31, 2023 that was filed with the SEC on March 4th 2024 and discussion on Form 10-Q for the quarter ended March 31, 2024 that was filed with the SEC last night.
Speaker Change: We will also refer to non-GAAP financial measures and you'll find reconciliations in the press release relating to this conference call, which can be found on the Investor Relations page of our website.
Alex Murray: 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 relations page of our website. With that, I will now turn the call over to Frank. Thank you, Alex.
Frank: With that I will now turn the call over to Frank.
Frankie S. Renda: Thank you, Alex. Good morning, and thank you for joining Southland's first quarter 2024 conference call. Before discussing our quarterly results, I'd like to extend gratitude to each of our employees for their contribution to maintaining our commitment to delivering high-quality work while prioritizing safety. This past week was National Safety Week, and our teams across the country took a moment to celebrate our safety success. As an example, our team working on the SELA project in New Orleans just celebrated successfully working 1,350 days without a lost time incident. Congratulations, team!
Frank Smith: Thank you Alex good morning, and thank you for joining <unk> first quarter 2024 conference calls before discussing our quarterly results I'd like to extend gratitude to each of our employees for their contribution to maintaining our commitment to delivering high quality work, while prioritizing safety this past week.
Frank Smith: Was national safety week, and our teams across the country took a moment to celebrate our safety successes.
Alex Murray: As an example, our team working on the <unk> project in New Orleans, just celebrated successfully working 1350 days without a lost time incident. Congratulations team. We are proud to have an exemplary safety record and they're always focused on what more we can do to protect our people.
Frankie S. Renda: We are proud of our exemplary safety record and are always focused on what more we can do to protect our people. Now, to discuss our quarterly results. We reported $288 million in revenue, up 5% from the same quarter last year. Gross profit was $20 million in the first quarter, compared to $19 million last year. Consolidated gross profit margin was 7.1%, up slightly from 6.9% in the prior year.
Alex Murray: Now to discuss our quarterly results, we reported $288 million of revenue up 5% from the same quarter last year.
Alex Murray: Gross profit was $20 million in the first quarter compared to $19 million last year.
Alex Murray: Consolidated gross profit margin was seven 1% up slightly from six 9% in the prior year our quarter was highlighted by continued strong results in our civil segment.
Frankie S. Renda: Our quarter was highlighted by continued strong results in our civil segment, offset by challenges in our transportation segment from legacy projects. Civil segment gross profit margin was 21% compared to 12% in the same period last year. This was despite more severe weather than typical in the quarter. Our civil segment groups are executing very well. We're also seeing the benefit from newly awarded civil segment projects that were won with higher bid margins ramping more quickly than our new transportation project.
Speaker Change: Set by challenges in our transportation segment from legacy projects.
Speaker Change: Civil segment gross profit margin was 21% compared to 12% in the same period last year, despite more severe weather than typical in the quarter. Our civil segment groups are executing very well. We're also seeing the benefit from newly awarded Civil segment projects that were won the higher bid margins.
Speaker Change: Ramping more quickly than our new transportation projects our.
Frankie S. Renda: Our transportation segment's gross profit margin was 1% compared to 5% in the prior year. We faced challenges in the quarter due to schedule delays, increased project costs, and impacts from weather in some key geographical areas in our transportation segment. We've brought the remaining M&P backlog down to approximately $200 million, or 8% of our backlog. We continue to expect to complete a substantial portion of the remaining work in 2024, with a smaller amount of work to be completed in 2025. Every day, we get closer to putting this work behind us.
Speaker Change: Our transportation segments gross profit margin was 1% compared to 5% in the prior year, we faced challenges in the quarter due to scheduled delays increased project costs and impacts from weather and some key geographical areas in our transportation segment.
Speaker Change: We've brought the remaining MMP backlog down to approximately $200 million or 8% of our backlog. We continue to expect to complete a substantial portion of the remaining work in 2024 with a smaller amount of work to be completed in 2025.
Speaker Change: Every day, we get closer to putting this work behind us.
Frankie S. Renda: We ended the quarter with $2.64 billion in backlog. We booked approximately $100 million in new awards during the quarter. This included a $56 million wastewater treatment plant in the Southwest. We've already announced over $350 million of new awards in the second quarter that were not included in the $2.64 billion backlog we had at the end of the first quarter. This includes the $202 million Bull Run filtration facility project in Portland, Oregon, and three new water resource projects totaling $150 million.
Speaker Change: We ended the quarter with $2 $64 billion of backlog, we booked approximately $100 million of New awards. During the quarter. This included a $56 million wastewater treatment plant in the southwest.
Speaker Change: We've already announced over $350 million of New awards in the second quarter that were not included in the $264 billion backlog, we had at the end of the first quarter.
Speaker Change: This includes the $202 million Bull run filtration facility project in Portland, Oregon, and three new water resource projects totaling $150 million, we expect backlog to increase sequentially from the first to second quarter, given the strong start of New awards.
Frankie S. Renda: We expect backlog to increase sequentially from the first to second quarter given the strong start of new awards. We also have several proposals that we have submitted on and are waiting to hear back from our customers on. This includes packages from the Galveston-Maytock-Sabine Pass, the Stanley Park Tunnel, the San Juan Lateral Water Treatment Facilities, and Ansel Tank Farm Facilities.
Speaker Change: We also have several proposals that we have submitted on and are waiting to hear back from our customers. On this includes packages from the Galveston Bay talks have been past the Stanley Park tunnel.
Speaker Change: San Juan lateral water treatment facilities, and an salt any foreign facilities.
Frankie S. Renda: Demand from both public and government agencies and private clients remains extremely healthy across our end market. On the public side, in the U.S., we are seeing strong demand from the IIJA and robust state and local programs. Among numerous other opportunities, we expect to submit proposals on the SR-30 DuPont Bridge for the Florida Department of Transportation and the Montgomery Lock Project for the U.S. Army Corps of Engineers.
Speaker Change: Demand from both public government agencies and private clients remains extremely healthy across our end markets.
Speaker Change: On the public side in the U S. We are seeing strong demand from the Iia JA and robust state and local programs.
Speaker Change: Numerous other opportunities we expect to submit proposals on the SAR 30, Dupont bridge for the Florida Department of transportation.
Speaker Change: And the <unk> project for the U S. Army Corps of Engineers. We are also tracking several tunnel ridge projects that we expect to bid in the coming months. Our primary focus is to capitalize on the credible opportunities in the U S. In our core end markets we.
Frankie S. Renda: We are also tracking several tunnel and bridge projects that we expect to bid on in the coming months. Our primary focus is to capitalize on the incredible opportunities in the U.S. and our core industry. We expect these opportunities to drive our business over the long term. As a reminder, we also have a presence in major metro areas in Canada. We are currently in the final stages of the Ashbridges Bay Upfall Tunnel in Toronto, which is one of the largest wastewater outfalls in Canada.
Speaker Change: We expect these opportunities to drive our business over the long term.
Speaker Change: As a reminder, we also have a presence in major metro areas in Canada. We are currently in the final stages of the Ash Fridges Bay alcohol Tuttle in Toronto.
Speaker Change: Which is one of the largest wastewater out falls in Canada.
Frankie S. Renda: We are also currently working on phase one of the North End Treatment Plant in Winnipeg and several emergency projects in Vancouver. Although it is a relatively smaller portion of our total business today, we believe public work in Canada presents a unique opportunity for us over the next several years. Similar to the U.S., the Canadian government is focused on improving and maintaining their aging infrastructure. We are tracking various water resource, tunnel, and rail programs across the country. We expect to submit our final proposal on Phase 2 of the North End Treatment Plant in Winnipeg in the coming week and are shortlisted for a $750 million water program in Vancouver.
Speaker Change: We are also currently working on phase one of the north in treatment plant in Winnipeg, and several emergency projects in Vancouver.
Speaker Change: Although it is a relatively smaller portion of our total business today, we believe public work in Canada presents a unique opportunity for us over the next several years.
Speaker Change: Similar to the U S. The Canadian government is focused on improving and maintaining their aging infrastructure. We are tracking various water resource tunnel and rail programs in the country. We.
Speaker Change: We expect to submit our final proposal on phase II of the north in treatment plant in Winnipeg in the coming weeks and are Shortlisted on a $750 million water program in Vancouver.
Frankie S. Renda: On the private client side, we continue to see our blue chip private clients make investments in marine and land development. This includes several upcoming opportunities for our existing private clients in the travel, leisure, and entertainment sectors. We're also monitoring trends and longer-term opportunities from the strong demand for manufacturing facilities and data centers in the U.S. We believe there will be opportunities for civil packages on the front end of these facilities over the coming year.
Speaker Change: On the private client side, we continue to see our blue chip private clients make investments in marine and land development.
Speaker Change: This includes several upcoming opportunities for our existing private clients in the travel leisure and entertainment sector.
Speaker Change: We're also monitoring trends and longer term opportunities from the strong demand for manufacturing facilities.
Speaker Change: Data centers in the U S.
Speaker Change: We believe there will be opportunities for civil packages on the front end of these facilities over the coming years in summary, we had a good start to the year demonstrated by strength in our civil business, we continue to get closer to getting our challenge projects behind us, we have announced over $350 million of.
Frankie S. Renda: In summary, we had a good start to the year, demonstrated by strength in our civil business. We continue to get closer to getting our challenge projects behind us. We've announced over $350 million in awards early in the second quarter and expect backlog to grow from the first to second quarter. Demand in our end markets remains very strong, and I am optimistic about new award potential as we progress through the year. With that, I will now turn the call over to Cody for a financial update. Thank you.
Speaker Change: Awards early in the second quarter and expect backlog to grow from the first to second quarter <unk>.
Speaker Change: Demand in our end markets remains very strong and I am optimistic about New award potential as we progressed through the year.
Cody: With that I will now turn the call over to Cody for a financial update.
Cody Gallarda: Thank you, Frank, and good morning everyone. I will discuss an overview of our financial performance during the first quarter of 2024. You can find additional details and information in the financial statements, footnotes, and management discussion and analysis that were filed on form 10-Q last night. Revenue for the quarter was $288 million, up $13 million from the same period in 2023. Gross profit for the first quarter was $20 million, an increase of $1.5 million from the same period in 2023.
Cody: Thank you Frank and good morning, everyone I will discuss an overview of our financial performance. During the first quarter of 2024, you can find additional details or information in the financial statements footnotes and management's discussion and analysis that were filed on Form 10-Q last night.
Cody: Revenue for the quarter was $288 million up $13 million from the same period in 2023 gross profit for the first quarter was $20 million, an increase of $1 5 million from the same period in 2023.
Cody Gallarda: Gross profit margin in the quarter was 7.1% compared to 6.9% in the prior year. Selling general and administrative costs in the first quarter were $14 million, a decrease of $1.2 million compared to the same period in 2023. A large driver of this decrease was one-time expenses related to becoming a public company in the prior year's first quarter. Interest expense for the quarter was $6 million, an increase of $2.4 million compared to the same period in 2023. The difference is attributable to increased borrowing costs and higher debt balances.
Cody: Gross profit margin in the quarter was seven 1% compared to six 9% in the prior year.
Cody: Selling general and administrative costs in the first quarter were $14 million, a decrease of $1 2 million compared to the same period in 2023.
Speaker Change: A large driver of this decrease was onetime expenses related to becoming a public company in the prior year's first quarter.
Speaker Change: Interest expense for the quarter was $6 million, an increase of $2 4 million compared to the same period in 2023. The difference was attributable to increased borrowing costs and higher debt balances.
Speaker Change: Income tax expense was $300000 for the first quarter compared to $1 8 million in the same period last year.
Cody Gallarda: Income tax expense was $300,000 for the first quarter, compared to $1.8 million for the same period last year. We expect our 2024 annual effective tax rate to be in the 18 to 22 percent range, depending on certain tax credits, non-deductible items, and certain state and local taxes. We reported a net loss of $400,000, or negative one cent per share, in the quarter, compared to a net loss of $5 million, or negative $0.11 per share, in the same period of last year.
Speaker Change: We expect our 2024 annual effective tax rate to be in the 18% to 22% range, depending on certain tax credits nondeductible items and certain state and local taxes.
Speaker Change: We reported a net loss of $400000 or negative <unk> <unk> per share in the quarter.
Speaker Change: Compared to a net loss of $5 million or negative <unk> 11 per share in the same period of last year.
Speaker Change: We reported an adjusted net loss of $400000 or negative <unk> <unk> per share in the quarter compared to an adjusted net loss of $1 5 million or negative <unk> <unk> per share the same period last year.
Cody Gallarda: We reported an adjusted net loss of $400,000, or negative one cent per share, in the quarter compared to an adjusted net loss of 1.5 million, or negative three cents per share, in the same period last year. In the first quarter, we produced EBITDA, or Earnings Before Interest, Taxes, Depreciation, and Amortization, of $11 million, compared to EBITDA of $9 million for the same period in 2023 We produced adjusted EBITDA of $11 million compared to adjusted EBITDA of $13 million for the same period in 2023 after reversing out non-cash expenses from changes in the fair value of our earn-out liability and transaction-related expenses.
Speaker Change: For the first quarter, we produced EBITDA or earnings before interest taxes, depreciation and amortization of $11 million compared to EBITDA of $9 million for the same period in 2023.
Speaker Change: We produced adjusted EBITDA of $11 million compared to adjusted EBITDA of $13 million for the same period in 2023 after reversing out noncash expenses from changes in the fair value of earn out liability and transaction related expenses in 2023.
Cody Gallarda: Now to touch on segment performance for the quarter. Our civil segment had revenues of $84 million, an increase of $11 million from the same period in 2023. Our civil segment gross profit was $18 million, an increase of $9 million from the same period in the prior year. As a percentage of revenue for the quarter, our civil segment had a gross profit margin of 21% compared to 12% in the same period in 2023.
Speaker Change: Now to touch on our segment performance for the quarter.
Speaker Change: Our civil segment had revenues of $84 million.
Speaker Change: An increase of $11 million from the same period in 2023 or.
Speaker Change: Our civil segment gross profit was $18 million, an increase of $9 million from the same period in the prior year.
Speaker Change: As a percentage of revenue for the quarter, our civil segment had gross profit margin of 21% compared to 12% in the same period in 2023.
Cody Gallarda: For the quarter, our transportation segment had revenues of $204 million, an increase of $2 million from the same period in 2020. Our transportation segment gross profit was $3 million, a decrease from $10 million in the same period in the prior year. As a percentage of revenue for the quarter, our transportation segment had a gross profit margin of 1% compared to 5% for the same period in 2023. The Materials and Paving Business Line contributed $38 million to revenue and negative $10 million to gross profit in the first quarter. We experienced more severe weather than typical in the quarter, increased project costs, and schedule delays that impacted the expected costs to finish these projects.
Speaker Change: For the quarter, our transportation segment had revenues of $204 million, an increase of $2 million from the same period in 2023.
Speaker Change: Our transportation segment gross profit was $3 million.
Speaker Change: A decrease from $10 million in the same period in the prior year.
Speaker Change: As a percentage of revenue for the quarter, our transportation segment had a gross profit margin of 1% compared to 5% for the same period in 2023.
Speaker Change: The materials and paving business line contributed $38 million to revenue.
Speaker Change: And negative $10 million to gross profit in the first quarter.
Speaker Change: We experienced more severe weather than typical in the quarter increased project cost and schedule delays that impacted the expected cost to finish these projects.
Speaker Change: We still anticipate we will be substantially complete with these projects by mid 2025.
Cody Gallarda: We still anticipate we will be substantially complete with these projects by mid-2025. Our core operating results in this segment, excluding materials and payment, would have been $165 million of revenue and $12 million of gross profit for a gross profit margin of 8%. Our consolidated core results in the quarter, which excluded materials and paving, would have been $249 million of revenue and $31 million of gross profit for a gross profit margin of 12%.
Speaker Change: Our core operating results in this segment.
Speaker Change: Excluding materials and take it would have been $165 million of revenue and $12 million of gross profit gross profit margin of 8%.
Speaker Change: Our consolidated core results in the quarter, which excluded materials and paid it would have been $249 million of revenue and $31 million of gross profit for a gross profit margin of 12%.
Cody Gallarda: Turning to the balance sheet, as of March 31, 2024, we had net debt of $255 million, inclusive of cash and restricted cash of $47 million. As a reminder, a substantial part of our debt consists of several fully amortizing five-year equipment notes. We expect to pay down approximately $46 million of debt in the next 12 months with our existing debt structure. In recent years, we have typically paid down existing equipment notes monthly, then refinanced tranches to take advantage of equity in our equipment.
Speaker Change: Turning to the balance sheet.
Speaker Change: As of March 31, 2024, we had net debt of $255 million inclusive of cash and restricted cash of $47 million.
Speaker Change: As a reminder, a substantial part of our debt consists of several fully amortizing five year equipment notes, we expect to pay down approximately $46 million of debt in the next 12 months with our existing debt structure. In recent years, we have typically paid down existing equipment notes months been refinanced tranches to take advantage of equity and are equipped.
Speaker Change: Yeah.
Cody Gallarda: We are currently evaluating potential options that will replace our equipment. The goal would be to simplify the debt structure with fewer facilities, lower the cash outlay for debt service with a more favorable amortization schedule, and extend the maturities of our existing debt. We will share more details at the appropriate time. Thank you for your time and interest in Southland. I'll now pass the call back to the operator for any questions.
Speaker Change: We are currently evaluating potential options that will replace our equipment notes.
Speaker Change: The goal would be to simplify the debt structure with fewer facilities.
Speaker Change: Sure the cash outlay for that service with a more favorable amortization schedule and extended the maturities of our existing debt, we will share more details at the appropriate time.
Speaker Change: Thank you for your time and interest in southwest I'll now pass the call back to the operator for any questions you may have.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to decline from the phoning process, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any key. Our first question comes from the line of Adam Thalhimer from Thompson Davis. Please go ahead.
Speaker Change: Have a question. Please press star followed by one on your telephone keypad.
Speaker Change: We have a pump that you had this big base schedule those should decline from the polling process. Please press star followed by two.
Speaker Change: Are you seeing a speaker phone please.
Speaker Change: The port pressing any keys.
Speaker Change: Our first question comes from the line of Adam Thalheimer from Thompson Davis. Please go ahead.
Adam Robert Thalhimer: Hey, good morning, guys. Congratulations on the Q1 beat.
Speaker Change: Hey, good morning, guys. Congrats on the Q1 beat.
Frankie S. Renda: Hey, thanks. Good morning, Adam. Good morning, Adam.
Adam Robert Thalhimer: Hey, Thanks, Good morning, Adam.
Adam Robert Thalhimer: I did want, I wanted to dive into transportation a little bit. How should we think about the prospect of the continued M&P losses? And is there anything starting in that segment that could offset that and drive margin increases?
Speaker Change: I wanted to.
Speaker Change: Dive into transportation a little bit.
Speaker Change: How should we think about the prospect of the continued MMP losses and is there anything starting in that segment that could drive.
Speaker Change: They can offset that and drive margin upside.
Frankie S. Renda: Yeah, we've got the... We've got a couple of jobs starting that we feel really good about. We've talked about the Shands Bridge in the past, the US-19 project, so a lot of good work that we picked up in the 2022 time frame that really should start to produce some revenue there. As far as the legacy work, we've recorded reduced margins, that's out there right now. We've maintained our estimated substantial completion date for M&P of the middle of 2025, and we expect the bulk of the work to be completed this year. So, very confident in the new work that we've picked up, and legacy work, you know, will be less and less of the backlog going forward to the mid-2025 completion date.
Speaker Change: Yes, we got.
Speaker Change: We've got a couple of jobs, starting that we feel really good about we've talked about the <unk> bridge in the past.
Frankie S. Renda: And Frank, it sounds like, because you made that comment about... you know, less than the first half of twenty five and in the remainder twenty four seconds that implies Q2, Q3, you're going to be earning more than $40 million a quarter as you get into this construction.
Speaker Change: The U S 19 projects. So a lot of a lot of good work that we picked up in that.
Speaker Change: 2023.
Speaker Change: 2022 timeframe that that really should start to produce some revenue there as far as the legacy work.
Speaker Change: We've recorded reduced margins or loss contingencies for all that we know.
Speaker Change: That's out there right now we've mainstay we've maintained our estimated substantial completion date for MMP of middle of 2025, and we expect the bulk of the work to be completed this year. So we're very very confident.
Speaker Change: In the new work that we've picked up and legacy work will be will be less and less of the backlog going forward in mid 2025 completion date.
Speaker Change: And Frank it sounds like because you made that comment about.
Speaker Change: Less than the first half of 'twenty five and in the remainder of 'twenty four so I guess that implies.
Frank Smith: Q2, Q3, youre going to be earning more than $40 million a quarter.
Frank Smith: As you get into construction season.
Frank Smith: Okay.
Frankie S. Renda: Historically, quarter one is a slow quarter coming out of the holidays. We had some weather in numerous areas that we expect to pick up throughout the summer months.
Frank Smith: Historically quarter one is.
Speaker Change: As a slow quarter coming out of the holidays, we had some weather.
Speaker Change: In numerous areas and we expect to.
Pick up throughout the summer months.
Adam Robert Thalhimer: And Adam just to clarify that mid 25 days for the MLP completion that we've been disclosing.
Frankie S. Renda: And Adam, just to clarify, that mid-25 days for the M&P completion that we've been disclosing? that we continue to work through at the rate that we announced back when we discontinued the...
Adam Robert Thalhimer: We continue continue to work through at the rate that we have.
Adam: Announced back when we discontinue the LNG business line in Q2 of last year.
Adam: Correct Okay.
Adam Robert Thalhimer: And then great margins in civil, you know, above 20% for the second straight quarter. What's your outlook for margins in civil?
Adam: And then great margin and civil above 20% for the second straight quarter, what's your outlook for margins in our civil segment.
Frankie S. Renda: You know, the civil segment is, you know, an area that we've picked up a lot of work in recently. We talked about the 350 million dollars that we picked up throughout the first quarter. Really good, really good jobs in Portland, in Portland, Oregon. Sorry, that was what we picked up in the second quarter, Adam.
Adam: Civil segment is.
Speaker Change: An area that we've picked up a lot of work and recently, we talked about the $350 million that we picked up throughout the first quarter.
Speaker Change: Really good really good jobs.
Portland.
Speaker Change: In Portland, Oregon, sorry that was that we picked up.
Adam: In the second quarter Adam so.
Adam Robert Thalhimer: So a lot of that is skewed to the civil side. I'm so excited about that, and there are so many other, you know, opportunities out there for us on the civil side throughout the country. A lot of great tunnels, you know, whether it's tunnels, water treatment plants, wastewater treatment plants, pipelines. There are numerous jobs that we have and are focusing on in that sector, so excited about the potential for some really good healthy margins in the civil segment.
Adam: Lot of that is skewed to the civil side.
Adam: So excited about that and there are so many other opportunities out there for us on the civil side throughout the country a lot of a lot of great tunnels.
Whether it's tunnels water treatment plants wastewater treatment plants pipelines there is numerous jobs that we.
Adam: Have and are submitting on in that sector. So excited about the potential for some really good healthy margins in the civil segment.
Adam: Okay.
Operator: All right, I'll turn it over to you guys. Thanks, guys.
Adam: Alright, I'll turn it over thanks guys.
Adam: Thanks, Adam.
Our next question comes from the line of Julio Romero from Sidoti. Please go ahead.
Julio Alberto Romero: Our next question comes from the line of Julio Romero from Sidoti. Please go ahead.
Julio Alberto Romero: Thanks, Hey, good morning, Frank <unk> Alex.
Julio Alberto Romero: Thanks. Hey, good morning, Frank, Cody, and Alex.
Julio Alberto Romero: I wanted to stay on civil if I could.
Julio Alberto Romero: I wanted to stay civil, if I could. You know, really solid execution in that quarter. It doesn't sound like there were any large project closeouts in the quarter. Maybe correct me if I'm wrong. And then secondly, did you have any pickup of like, you know, shorter burn work that helped during the inter quarter? And does that continue? So we.
Julio Alberto Romero: Really solid execution in that quarter. It doesn't sound like there were any large project closeouts in the quarter.
Julio Alberto Romero: Correct me, if I'm wrong, and then secondly did you have any pickup of like shorter.
Alex Murray: <unk> burn work that helped intra quarter and does that continue.
Speaker Change: So we definitely had some emergency projects that we were able to complete in Q1.
Frankie S. Renda: So we definitely had some emergency projects that we were able to complete in Q1. However, that doesn't change our optimism and outlook for the civil segment as a whole. Typically, civil projects are nationally smaller and shorter burn than our average transportation project, so you are going to see the newer awards in civil make contributions sooner than the newer awards that we've had at TransCity.
Speaker Change: However that doesn't change our optimism and outlook for the civil segment as a whole.
Speaker Change: Typically civil projects are.
Speaker Change: Naturally smaller and shorter burn than our average transportation projects. So you are going to see the newer awards in civil mix contribution sooner than the newer awards that we've had a transportation.
Speaker Change: Okay.
Speaker Change: Okay got it and what does the end market mix look like these days within civil and is that contributing to the good execution there.
Julio Alberto Romero: Okay, got it. And, you know, what does the market mix look like these days within civil engineering? And is that contributing to good execution there?
Speaker Change: Yes, the end market mix solely within several continues to be across all the areas that we specialized within that civil segment, we're seeing projects from water and wastewater treatment.
Frankie S. Renda: Yeah, the end market mix solely within CIVL continues to be across all the areas that we specialize within that CIVL segment. We're seeing projects from water and wastewater treatment, packages, pipelines, and pump stations. We're very excited about some emergency work opportunities that we have with a longstanding customer.
Speaker Change: Packages pipelines pump stations are very excited about some emergency work opportunities that we have with a longstanding customer.
Julio Alberto Romero: So not concentrated in any one area within CIVL. The water side, lots of opportunities. Same with the tunnel side as well, albeit the tunnel projects are a little fewer and further between, but tracking some great prospects there. Any part of that question I need to expand on a little further, Julio?
Speaker Change: So not concentrated in any one area within civil.
Speaker Change: The water side lots of opportunities, saying, what the tunnel side as well, albeit the tunnel projects are a little fewer and further between but tracking some great prospects there.
Speaker Change: In any part of your question I need to expand on a little further earlier.
Frankie S. Renda: No, I think that's good. The last one, and it is on civil again, is a quick refresher on what the average project duration is in civil these days.
Speaker Change: No I think that's good.
Speaker Change: Last one and it is on civil again.
Speaker Change: A quick refresher on what's the average project duration and simple these days.
Julio Alberto Romero: Yeah, so we haven't disclosed any kind of average project size and duration by civil. You know, across the board of both segments, average project size is somewhere around that hundred hundred hundred fifty million dollar number with a two, two and a half year duration. That's the average. Our median project size and duration are significantly lower than that. So the projects within civil, you know, you could certainly interpret that to be smaller, quicker burn projects, which is in line with the number of announcements that we've made recently.
Speaker Change: Yes, so we haven't disclosed kind of average project size and duration by across the board. Both segments average project size is somewhere around that 100, 100 $150 million number with a two two and a half year.
Speaker Change: Duration.
Speaker Change: That's the average or our median project size and duration are significantly lower than that.
So the projects within civil.
Speaker Change: Certainly.
Speaker Change: Interpret that to be smaller quick quick quicker burn hitting projects, which is in line with the number of announcements that we've made recently.
Speaker Change: Understood very helpful. I'll pass it on thank you.
Operator: understood. Really helpful. I'll pass it on. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Christian Schwab from Craig Hallum Capital Group. Please go ahead.
Christian David Schwab: Our next question comes from the line of Christian Schwab from Cray Kalem Capital Group. Please go ahead.
Christian David Schwab: Hey, great, thanks for taking my question. A solid quarter. So last quarter, we talked about potentially completing about 40% of the current backlog at that time in 2024, which, on our math at the time, equated to a little bit over $1.1 billion in revenue. We had some gyrations around that, obviously, at the start of the year, and we talked about the big awards. Is that still plus or minus the right number that we should be thinking about for the year?
Christian David Schwab: Hey, great. Thanks for taking my question solid quarter, So last quarter, we talked about.
Christian David Schwab: Potentially completing about 40% of the current backlog at that time.
Christian David Schwab: In 2024, which on our math the time equated to a little bit over $1 1 billion in revenue we've had some gyrations around that obviously at the start of the year and we talked about the Big Awards.
Christian David Schwab: Is that still plus or minus the right number that we should be thinking about for the year.
Christian David Schwab: Yes.
Frankie S. Renda: It is. We're still in that 40, I think 42% backlog burn over the next 12 months from the end of the year. So the untapped rolling percentage has maintained.
Christian David Schwab: As we're still in that 40, I think 42% backlog burn over the next 12 months from the end of the first quarter.
Christian David Schwab: So that in fact rolling percentage has been obtained.
Christian David Schwab: Alright, perfect. And then with the Infrastructure Investment Jobs Act, is that really more of a big tailwind for backlog in 2025, or are some of these projects that you highlighted because of that?
Speaker Change: Alright, perfect and then what's the infrastructure investment jobs Act is that really more of a big tailwind to backlog in 'twenty five or some of these projects that you that you highlighted.
Christian David Schwab: Because of that.
Speaker Change: Yes, I think we're starting to see some of the funds being allocated from the IAA JA, but we're still very early in that process. So there hasnt been just a ton of impact of Southland.
Frankie S. Renda: Yeah, I think, you know, we're starting to see some of the funds being allocated from the IIJA, but we're still very early on in that process. There hasn't been just a ton of impact on Southland, so I think that going forward, we're going to see more and more of a tailwind from the IIJA and numerous other spin-offs, but the state and local agencies continue to put out a record number of projects. There's no shortage of projects to choose from right now. Christian, we're going to continue to be very selective and pick the perfect jobs that fit us to build our backlog.
Speaker Change: So I think that.
Speaker Change: I think that going forward, we're going to see more and more of a tailwind from the IHA and numerous other spins, but to state and local agencies continue just to put out a record number of projects. There is no shortage of projects to choose from right now Christian we're going to continue to be very selective.
Christian David Schwab: Pick the perfect jobs that fit us to build our backlog.
Christian David Schwab: Okay, and then just my last question, another question on the civil segment. It seems from our checks that there's just a tremendous amount of work that needs to be done, which is causing, in some instances, less bidding on different projects. Is that part of the reason why the gross margins and your confidence and strength, are you seeing a little less competition given all the work, or is that just not the reason? Is it more than just great execution by the team?
Christian David Schwab: Okay and then just my last question. Another question on the Civil segment. It seems from our checks that there is just.
Christian David Schwab: A tremendous amount of work that needs to be done.
Speaker Change: Which is causing in some instances less bidding.
Speaker Change: On different projects is that part of the reason why the gross margins and your confidence and strength are you seeing a little less competition.
Speaker Change: Given all the work or is that just.
Speaker Change: Not the reason is it more just great execution by the team.
Frankie S. Renda: Yeah, I think the team's doing a great job selecting the projects, the teams are doing a great job completing the projects or setting up the plans to complete the projects operationally. And the market is really good for us to be able to select the perfect project. So kind of the perfect storm of work is out there, and we have the right teams in place to be able to take advantage of it. Fantastic
The team: Yes, I think the team's doing a great job in selecting the projects. The teams are doing a great job.
Speaker Change: Completing the projects are setting up the plans to complete the projects operationally.
Speaker Change: The market is is really good for us to be able to select the perfect projects. So kind of the kind of the perfect storm of.
Speaker Change: Of work is out there.
Speaker Change: We have the right teams in place to be able to take advantage of it.
Speaker Change: Fantastic no other questions. Thank you.
Christian David Schwab: Fantastic. No other questions. Thank you.
Christian: Thank you Christian.
Speaker Change: Again as a reminder, if you wish to ask a question. Please press star one thank you.
Operator: Again, as a reminder, if you wish to ask a question, please press star 1. Thank you. Our next question comes from the line of Jean Ramirez from D.A. Davidson. Please go ahead.
Speaker Change: Our next question comes from the line of Jim Munis from D. A Davidson. Please go ahead.
John: Good morning, This is John for Brent Thielman.
Jean Paul Ramirez: Good morning, this is John on behalf of Brent Thielman. Congratulations on the quarter. Thanks. Good morning, John. Um, I just want to pivot back to, um, the legacy. Could you provide a little more color as to how you see the impact on gross margins, I guess the cadence to gross margins as you proceed to 2024, given a lot of the bulk work happens in Q2 and Q3. Thank you.
John: Congrats on the quarter.
John: Great. Thanks, Good morning, John.
John: I just wanted to pivot back to.
Speaker Change: The legacy.
John: Could you provide a little more color as how you see the.
John: The impact on gross margins I guess, the cadence to gross margins as you proceed through 2024.
Speaker Change: Given a lot of the bulk work happens in Q2 and Q3. Thank you.
Speaker Change: Yes, so we do expect the cadence on.
Frankie S. Renda: Yeah, so we do expect the cadence on the legacy backlog to decline sequentially quarter over quarter moving forward, just as you would expect, naturally, with that work tailing off, and you're going to see kind of the pivot point there, as the legacy work burns down, new work contributing will pick up, which we expect to drive positive cash flows as we move into the back half of the year. With that seasonality in mind, though, as you mentioned, Q2 typically sees higher volumes, Q3 higher volumes, and then slow down typically as we head into the finish of the year. So there is no reason that we would expect that cadence to be any different this year versus prior years.
Speaker Change: The legacy backlog to decline sequentially quarter over quarter moving forward just as you as you would expect nationally with that work tailing off.
Speaker Change: And youre going to see kind of the.
Speaker Change: Yes.
Speaker Change: Pivot point, there, whereas the legacy work Burns down.
Speaker Change: New work contributing will pick up which we expect to drive positive cash flows as we move into the back half of the year.
Speaker Change: With that with that seasonality in mind, though as you mentioned, so Q2 would typically see higher higher higher volumes Q3 higher volumes and then slowdown typically as we head into finish of the year. So no reason that we would expect that cadence to be any different this year versus prior years.
Speaker Change: Thank you and rigor.
Frankie S. Renda: Thank you. And regarding cash flow, is that cadence similar to last year, or do you expect to pick up a little more cash by the end of this year compared to 2023?
Speaker Change: Regarding cash flow.
Speaker Change: Is that cadence similar to last year or do you suspect to pick up.
Rigor: Little more cash at the end of <unk> 24 compared to 2023.
Rigor: Yes, So let me break that into two part questions we do.
Frankie S. Renda: Yeah, so let me guess break that into two parts. You know, we can expect to see positive cash flows coming in the latter half of the year as we have historically, typically, the end of Q1 into Q2 are usually cash drains as we're ramping up work coming out of the year end and colder months. I think if you look at what our cash flow from the office has been in 21, 22, and 23, we continue to see improvement in cash flow from operations and expect that that trend will continue to the end of 2024.
Rigor: Expect to see positive cash flows coming in the latter half of the year as we have historically.
Rigor: The end of Q1 into Q2 are usually cash streams as we're ramping up work coming out of the year end and colder months. If you look at what our cash flow from ops is that in 'twenty, one 'twenty two and 'twenty three we continue to see improvement in cash flow from operations and expect that that trend will continue through the end of 2024.
Rigor: Thank you and I guess.
Jean Paul Ramirez: Thank you, and I guess. [inaudible] You said the backlog would increase sequentially, and correct me if I'm wrong, but you said that Q2's backlog should include 350 new awards. Is that correct? So.
Rigor: Excuse me with that.
Rigor: And.
Rigor: You said backlog would be would increase sequentially.
Rigor: And correct me, if I'm wrong, but you said that Q2 backlog should include 250 of New award is that correct.
Frankie S. Renda: So we've already announced 350 million dollars of new awards in the second quarter, so that is correct, and you know we have a number of proposals pending, and we expect a bit of a lot of work in the next few weeks. I'm excited about the new award potential. As we progress through the year, the ability to grow is definitely there, but we want to grow in a measured way and not sacrifice any margin. So we're focused on winning the highest-profitable work. weekend for the resources that we have in place.
Rigor: So we've already announced $350 million.
Speaker Change: New awards.
Speaker Change: In the second quarter, so that is correct yes.
Speaker Change #100: We have a number of proposals pending and we expect to bid a lot of work in the next few weeks.
Speaker Change: I am excited for the New award potential as we progress through the year the ability to grow is definitely there, but we want to grow in a measured way and not sacrifice any margin. So we're focused on winning the highest profitable work.
Speaker Change: We can through the resources that we have in place.
Speaker Change: Perfect. Thank you I appreciate that.
Jean Paul Ramirez: Perfect. Thank you. I appreciate that.
Rigor: Ill jump back in queue.
Rigor: Thank you. Thank you John.
Speaker Change #102: There are no further questions at this time I will now turn the call over to Mr. From Glenda. Please go ahead.
Frankie S. Renda: There are no further questions at this time. I will now turn the call over to Mr. Frank Renda. Please go ahead.
Frankie S. Renda: Thank you everyone for joining us today. I look forward to talking to you next quarter. Thanks, everyone. Ladies and gentlemen, this concludes today's conference call.
Glenda: Thank you to everyone for joining us today and look forward to talking to you next quarter. Thanks, everyone.
Glenda: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Glenda: And you may now disconnect.