Q2 2024 Southland Holdings Inc Earnings Call

Operator: Good morning, my name is Nicole, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southland second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Good morning, My name is and I will be your conference operator today.

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 star followed by the number one on your telephone. If you would like to withdraw your question, press start and number two.

Speaker Change: Finally, I would like to welcome everyone to the Southland second quarter plenty plenty for earnings conference call.

Speaker Change: All lines have been placed on mute to prevent any background 40.

Speaker Change: After the Speakers' remarks, there will be a question and answer session.

Speaker Change: We'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Speaker Change: If you would like to withdraw your question press.

Bart: Bart and number two.

Operator: Thank you. Alex, you may begin. Good morning, everyone, and welcome to Southland's second quarter of the 2024 competition. This is Alex Murray, Director of Cook Development and Investor Relief. Joining me today are Frank Renda, President and Chief Executive Officer, and Cody Gallarda, Executive Vice President and Chief Financial Officer. Before we 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 21 E of the Securities Exchange Act, 1934, and a private security litigation reformat. Forward-looking statements are neither historical facts nor assurances of future performance; they are uncertainty and outside of Southland's control.

Alex: Thank you Alex you may begin.

Alex: Good morning, everyone and welcome to the South of the second quarter 2024 conference call.

Alex: Alex Murray director of corporate development.

Greg Roufa: Joining me today break ground up President and Chief Executive Officer.

Speaker Change: Political our executive Vice President Chief Financial Officer.

Operator: Southland's actual results and financial conditions may differ materially from those projected for an open state program. Therefore, you should not rely on any of these four different statements, but would you not undertake any duty to update your state?

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.

Speaker Change: Great.

Speaker Change: Six of 21 E of the Securities Exchange Act.

Speaker Change: In the private Securities Litigation Reform Act of 1995.

Speaker Change: Forward looking statements are neither historical facts or assurances of future performance forward.

Forward looking statements are uncertain and outside of cycles control.

Speaker Change: Actual results and financial condition may differ materially from those projected forward looking statements.

Speaker Change: Therefore, you should not rely on any of these.

Speaker Change: We do not undertake any duty to update these statements.

Alex Murray: 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 June 30th, 2024, that was filed with the SEC last night. 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 you. Thank you, Alex.

Speaker Change: For a discussion of some of the risks that could affect results. Please.

Speaker Change: See the risk factors section of our Form 10-K for the year ended December 31.

Three that was filed with the SEC are more towards 2020 for a discussion on Form 10-Q.

Speaker Change: At June 32024 that was filed with the FCC last night.

Speaker Change: We will also refer to non-GAAP financial measures 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.

Speaker Change: With that I will now turn the call over to Frank. Thank you Alex Good morning, and thank you for joining its outflow in the second quarter 2024 conference call.

Frank Renda: Good morning, and thank you for joining Southland's second quarter 2024 conference call. We reported mixed results in the second quarter, with revenue of $252 million, down from $257 million last year. We reported a gross loss of $40 million, which compares to a gross loss of $34 million in the same period last year. Despite the challenges in the quarter, we had several positive leading indicators, including strong cash flow from operations of $27 million and new awards of $375 million in the strong bidding environment we've discussed in prior quarters.

Frank: We reported mixed results in the second quarter with revenue of $252 million.

Frank: Down from $257 million last year, we reported a gross loss of $40 million, which compares to a gross loss of $34 million from the same period last year. Despite the challenges in the quarter, we had several positive leading indicators, including strong cash flow from operations of 27 million.

Frank: And new awards of $375 million and the strong bidding environment, we've discussed in prior quarters.

Frank Renda: Our second quarter's income statement was negatively impacted by unfavorable adjustments of $40 million from the decision to settle disputes on legacy projects. While we were disappointed by the impact this had on our results this quarter, we will significantly strengthen our balance sheet by collecting $58 million from these disputes in the third quarter. This is in addition to the strong positive cash flow from operations of $27 million in the second quarter. Earlier this year on our fourth quarter 2023 conference call, I mentioned that we expected to have the opportunity to settle a considerable number of legacy disputes, with a focus on generating cash in 2024.

Frank: Our second quarter's income statement was negatively impacted by unfavorable adjustments of $40 million.

Frank: From the decision to settle disputes on legacy projects, while we were disappointed by the impact. This had on our results. This quarter, we will significantly strengthen our balance sheet by collecting $58 million from these disputes in the third quarter. This is in addition to the strong positive cash flow from operations of 27 million.

Nicole: Good morning, my name is Nicole, and I will be your conference operator today.

Nicole: At this time, I would like to welcome everyone to the Southland second quarter of 2024 earnings conference hall. All lines have been placed in mute to prevent any background points.

Nicole: After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed with the number one on your telephone key sign. If you would like to withdraw your questions, please press star and number two.

Frank: In the second quarter.

Frank: Earlier this year on our fourth quarter 2023 conference call I mentioned that we expected to have the opportunity to settle a considerable number of legacy disputes.

Frank: With a focus on generating cash in 2024.

Frank Renda: Our focus has been to quickly negotiate settlements that accelerate cash collections and minimize the risk and uncertainty associated with prolonged and expensive settlement proceedings. While we are disappointed about having to make the decision to settle for less than we believed that we were entitled to in certain circumstances, it was the best decision for Scotland's long-term future.

Alex Murray: Thank you, Alex, you may begin. Good morning, everyone, and welcome to the Southland second quarter of 2024 conference call. This is Alex Murray, Director of Cook Development and Investor Relations. Joining me today are Frank Renda, President and Chief Executive Officer, and Cody Gallarda, Executive Vice President Chief Financial Officer.

Frank: Our focus has been to quickly negotiate settlements that accelerate cash collections and minimize the risk and uncertainty associated with prolonged and expensive settlement pursuits.

Frank: While we are disappointed about having to make the decision to settle for less than we believed that we were entitled to in certain circumstances.

Frank: It was the best decision for <unk> long term outlook.

Alex Murray: Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements within the meeting with Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and a private security litigation reform act of 1995. Forward-looking statements are neither historical facts or assurances of future performance. Forward-looking statements are uncertain and outside of Southland's control. Childhoods actual results in financial conditions may differ materially from those projected forward-looking statements. Therefore, you should not rely on any of these forward-looking statements, but you do not undertake any duty to update the statements.

Frank Renda: With the recent dispute settlements and other initiatives to strengthen our balance sheet, we are in a much stronger position today to negotiate our remaining legacy disputes, and we will continue to vigorously pursue all the money that we are owed. We believe there will continue to be opportunities to generate a significant amount of cash from resolving legacy disputes and strong performance in our core business in the coming quarter, along with strong operating cash generation.

Frank: With the recent dispute settlements and other initiatives to strengthen our balance sheet. We are in a much stronger position today to negotiate our remaining legacy disputes and we will continue to vigorously pursue all the money that we are owed.

Frank: We believe there will continue to be opportunities to generate a significant amount of cash for resolving legacy disputes and strong performance in our core business in the coming quarters.

Frank: Along with strong operating cash generation.

Frank Renda: We have taken other steps to continue to bolster our balance sheet, which will allow us to pursue more opportunities in our core. We closed a $42.5 million real estate transaction in July, which resulted in $16 million of debt reduction and approximately $25 million of cash for general corporate purposes.

Frank: We have taken other steps to continue to bolster our balance sheet. This will allow us to pursue more opportunities in our core business.

Frank: We closed the $40 million to $45 million real estate transaction in July which resulted in $60 million of debt reduction and approximately $25 million of cash for general corporate purposes.

Alex Murray: For a discussion of some of the risks that could affect results, please see the risk factor section of our form 10K to the year end of December 31st, 2023, that was filed with the SEC on March 4th, 2024. And discussion on form 10K to the quarter of June 30th, 2024, that was filed with the SEC last night.

Frank Renda: We also continue to work through a debt refinance, which we mentioned on our last call. We will have additional details when this transaction is finalized, which we expect to occur before we report our third-quarter results. Challenges persist in our legacy portfolio projects, but we continue to make operational strides to put this work behind us. I've never been more confident in our core business projects than I am with the work that we have picked up over the past couple of years.

Frank: We also continue to work through a debt refinance which we mentioned on our last call.

Frank: We will have additional details when this transaction is finalized which we expect to occur before we report our third quarter results.

Alex Murray: We will also refer to non-GAP financial measures and you will find reconciliation and the press release relating to this conference call, which can be found on the Investor Relations page of our website.

Frank: Challenges persist in our legacy portfolio of projects, but we continue to make operational strides to put this work behind us that I've never been more confident in our core business projects than I am with the work that we have picked up over the past couple of years, we ended the quarter with $2 $74 billion of <unk>.

Frank Renda: With that, I will now turn the call over to Frank. Thank you, Alex.

Frank Renda: Good morning and thank you for joining Southland's Second Quarter 2024 conference call. We reported mixed results in the second quarter with revenue of $252 million down from $257 million last year. We reported a gross loss of $40 million, which compares the gross loss of $34 million in the same period last year. Despite the challenges in the quarter, we had several positive leading indicators including strong cash flow from operations of $27 million and new awards of $375 million in the strong bidding environment we've discussed in prior quarters.

Frank Renda: We ended the quarter with $2.74 billion of backlog, up from $2.64 billion last quarter. We booked approximately $375 million of new awards during the quarter. This included the $202 million Bull Run filtration facility in Portland, Oregon, and three new water resource projects totaling $150 million. We are also excited to announce that we have been informed that our team has been selected for phase two of the North End Treatment Plan in Winnipeg.

Frank: Backlog up from 264 billion last quarter, we booked approximately $375 million of New award during the quarter.

Frank: This included the $202 million Bull run filtration facility in Portland, Oregon, and three new water resource projects totaling $150 million.

Frank Renda: The project is being delivered as a progressive design build. We are in active contract discussions with the owner on the pre-construction phase of the contract, which we expect to transition from pre-construction activity into the construction contract by 2026. We expect our portion of the construction contract to be approximately $220 million. None of this amount is included in our second quarter backlog.

Frank: We are also excited to announce that we have been informed that our team has been selected for phase III. The north in treatment would affect the project is being delivered as a progressive design build we are in active contract discussions with the owner of the Preconstruction phase of the contract.

Frank Renda: Our second quarter's income statement was negatively impacted by unfavorable adjustments of $40 million from the decision to settle disputes on legacy projects. While we were disappointed by the impact this had on our results this quarter, we will significantly strengthen our balance sheet by collecting $58 million from these disputes in the third quarter. This is an addition of a strong positive cash flow from operations of $27 million in the second quarter. Court.

Frank: Which we expect to transition from pre construction activity into construction contract by 2026, we expect our portion of the construction contract to be approximately $220 million.

Frank: None of this amount is included in our second quarter backlog.

Frank Renda: We are currently working on phase one of the program with our partner ACOG. I would also like to note that we are currently in the pre-construction phase for the Earthquake Ready Burnside Bridge in Portland, Oregon. The new win on Phase 2 of the North End Treatment Plan brings our total pending alternative delivery construction contracts to approximately $500 million, which is not included in our $2.74 billion of backlog today. We have mentioned on previous calls that we are seeing our customers shifting towards alternative delivery contracts, like the progressive design bills or construction manager general contractor model. Alternative delivery methods promote early involvement of the contractor in the design process.

Frank Renda: Earlier this year, on our fourth quarter, 2023 conference call, I mentioned that we expected to have the opportunity to settle a considerable number of legacy disputes with a focus on generating cash in 2024. Our focus has been the quickly negotiate settlements that accelerate cash collections and minimize the risk and uncertainty associated with prolonged and expensive settlement pursuits. While we are disappointed about having to make the decision to settle for less than we believe that we were entitled to in certain circumstances, it was the best decision for Chaplin's long-term outlook.

Frank: We are currently working on phase one of the program with our partner Acorn.

Frank: I would also like to note that we are currently working on the pre construction phase for the earthquake ready Burnside bridge in Portland, Oregon.

Frank: The new win on phase two of the north in treatment brings our total pending alternative delivery construction contracts to approximately $500 million.

Frank: Which is not included in our $2 $74 billion of backlog today.

Frank: We have mentioned on previous calls that we are seeing our customers shifting towards alternative delivery contracts like the progressive design build or construction manager general contractor models.

Frank Renda: With the recent dispute settlements and other initiatives to strengthen our balance sheet, we are in a much stronger position today than negotiate our remaining legacy disputes and we will continue to vigorously pursue all the money that we are owed. We believe there will continue to be opportunities to generate a significant amount of cash from resolving legacy disputes and strong performance in our core business in the coming quarters. Along with strong operating cash generation, we have taken other steps to continue to bolster our balance sheet.

Frank: Alternative delivery methods promote early involvement of the contractor in the design process. We believe collaboration between the owner designer and contractor helps in identifying potential issues early and allows us for more informed decision making throughout the project.

Frank Renda: We believe collaboration between the owner, designer, and contractor helps in identifying potential issues early and allows us for more informed decision making throughout the project. We believe we can provide more innovative solutions and more efficient project execution while decreasing future risk potential. Alternative delivery contracts typically get awarded based on several factors other than just price, including schedule, resume, and technical score in our proposal. Our extensive technical experience across various markets makes us highly attractive to customers and gives us a true competitive advantage and alternative delivery bit.

Frank: We believe we can provide more innovative solutions and more efficient project execution, while decreasing future risk potential alternatives with delivery contracts typically get awarded based on several factors other than just price, including schedule resume and technical score in our proposal.

Frank Renda: This will allow us to pursue more opportunities in our core business. We close the $42.5 million real estate transaction in July which resulted in $16 million of debt reduction and approximately $25 million of cash for general corporate purposes. We also continue to work through a debt refinance which we mentioned on our last call. We will have additional details when this transaction is finalized which we expect to occur before we report our third quarter results.

Frank: Our extensive technical experience across various markets makes us highly attractive to customers and gives us a true competitive advantage and alternative delivery bids we believe our resume and over 120 year history of delivering specialty infrastructure projects will continue positioning us well to win alternative.

Frank Renda: We believe our resume and over 120-year history of delivering specialty infrastructure projects will continue to position us well to win alternative delivery projects in the coming years. Demand across our end markets continues to be very strong, and we believe we will continue to win our fair share of the robust opportunity. The EPA recently updated its Clean Water Infrastructure Needs Survey, which estimates that $630 billion is going to be needed to be spent over the next 20 years just to address the water equality objectives of the Clean Water Act.

Frank: Delivery projects in the coming years.

Frank: Demand across our end markets continue to be very strong and we believe we will continue to win our fair share of the robust opportunities.

Frank Renda: Challenges persist in our legacy portfolio projects but we continue to make operational strides to put this work behind us and I've never been more confident in our core business projects than I am with the work that we have picked up over the past couple of years. We ended the quarter with $2.74 billion of backlog from $2.64 billion last quarter. We booked approximately $375 million of new award during the quarter. This included the $202 million bull run filtration facility in Portland, Oregon and three new water resource projects totaling $150 million.

Speaker Change: The EPA recently updated its clean water infrastructure need survey, which estimates that $630 billion is going to be needed to be spent over the next 20 years just to address water quality objectives of the clean water Act to put this into perspective. The estimate 10 years ago was 270 <unk>.

Frank Renda: To put this in perspective, the estimate 10 years ago was $271 billion. We are ranked third in water transmission lines and in the top 10 in water supply and water treatment plants by engineering news records source books ranking.

Frank: $1 billion.

We are ranked third in water transmission lines and in the top 10 in water supply and water treatment plants by engineering news record source books rate case.

Frank Renda: We are well positioned to help improve North America's water infrastructure in an environment where there are few competitors that operate at the scale we do. We have active water projects across the U.S. from Florida all the way to Oregon and several underserved markets in between. We also have several water resource projects in large metro areas in Canada. There are not many water contractors that have the technical expertise, scale, and geographic footprint that we do.

Speaker Change: We are well positioned to help improve north America's water infrastructure in an environment, where there are few competitors that operate at the scale. We do we have active water projects across the U S from Florida, all the way to Oregon in several core markets in between we also have several water resource projects in large metro areas.

Frank Renda: We are also excited to announce that we have been informed that our team has been selected for phase two of the north end treatment plant and wind effect. The project is being delivered as a progressive design build. We are in active contract discussions with the owner on the pre-construction phase of the contract which we expect the transition from pre-construction activity into construction contract by 2026. We expect our portion of the construction contract to be approximately $220 million.

Speaker Change: In Canada.

Speaker Change: There are not many water contractors that have the technical expertise scale and geographic footprint that we have this gives us a true competitive advantage to capitalize on these opportunities.

Frank Renda: This gives us a true competitive advantage to capitalize on these opportunities. We're also seeing increased bidding opportunities from the IIJA, which is providing a major tailwind for our pipeline. We're in the early innings of the impact the act will have on our results. We believe the IIJA will provide significant opportunities for the next decade. And we are positioning ourselves to capitalize on these opportunities from the IIJA in the near term. We are focused on remaining disciplined and choosing projects that fit our teams very well. We also continue to bid on projects with very limited competition.

Speaker Change: We're also seeing increased bidding opportunities from the JA, which is providing a major tailwind for our pipeline.

Frank Renda: None of this amount is included in our second quarter backlog. We are currently working on phase one of the program with our partner ACON. I would also like to note that we are currently working on the pre-construction phase for the earthquake ready Burnside Bridge in Portland, Oregon. The new wind on phase two of the north end treatment plant brings our total pending alternative delivery construction contracts to approximately $500 million which is not included in our $2.74 billion of backlog today.

Speaker Change: We're in the early innings of this impact the act will have on our results. We believe the <unk> will provide significant opportunities for the next decade, and we are positioning ourselves to capitalize on these opportunities from the <unk> in the near term. We are focused on remaining disciplined in choosing projects that fit our <unk>.

Speaker Change: <unk> very well.

Speaker Change: We also continue to bid on projects with very limited competition, given the strong demand favorable competitive landscape and improvement in our balance sheet. We are optimistic about the potential for long term margin expansion as we continue to work through our legacy projects and our newer work with rate bids.

Frank Renda: Given the strong demand, favorable competitive landscape, and improvement in our balance sheet, we are optimistic about the potential for long-term margin expansion. As we continue to work through our legacy projects, and our newer work with great bid margin continues to come online. In summary, we faced several challenges this quarter, largely driven by the impact settling legacy disputes had on our income statement.

Frank Renda: We have mentioned on previous calls that we are seeing our customers shifting towards alternative delivery contracts like the Progressive Design Builds or Construction Manager General Contractor models, alternative delivery methods promote early involvement of the contractor in the design process. We believe we can provide more innovative solutions and more efficient project execution while decreasing future risk potential. Alternative delivery contracts typically get awarded based on several factors other than just price, including schedule, resume, and technical score in our proposal.

Speaker Change: Margin continues to come online.

Speaker Change: In summary, we faced several challenges this quarter largely driven by the impact steadily legacy disputes had on our income statement.

Frank Renda: We are encouraged by the cash flow improvement in the business, the strategic actions taken to strengthen our balance sheet, and the substantial backlog and new project awards that position us well for the future. Our focus remains on executing our core business effectively, capitalizing on the opportunities presented by the IAJA, and driving long-term margin expansion. With that, I will now turn the call over to Cody for a financial update. Thank you, Frank, and good morning, everyone.

Speaker Change: We're encouraged by the cash flow improvement of the business the strategic actions taken to strengthen our balance sheet and the substantial backlog and new project awards that position us well for the future.

Speaker Change: Our focus remains on executing our core business effectively.

Speaker Change: Capitalizing on the opportunities presented by the EIA JA and driving long term margin expansion.

Frank Renda: Our extensive technical experience across various markets makes us highly attracted to customers and gives us a true competitive advantage in alternative delivery bits. We believe our resume in over 120 year history and delivering specialty infrastructure projects will continue positioning us well to win alternative delivery projects in the coming years. Demand across our end markets continue to be very strong and we believe we will continue to win our fair share of the robust opportunities.

Speaker Change: With that I will now turn the call over to Cody for a financial update.

Cody: Thank you Frank and good morning, everyone.

Cody Gallarda: I will provide an overview of our financial performance during the second quarter of 2024. You can find additional details and information in the financial statements, footnotes, and management's discussion and analysis that were filed on Form 10-Q last night. Revenue for the quarter was $252 million, down 5 million from the same period in 2023. Gross loss for the second quarter was $40 million, compared to a gross loss of $34 million for the same period in 2023. Gross Prophet Margin for the quarter was negative 16% compared to negative 13% in the same period of the prior year.

Cody: I will provide an overview of our financial performance during the second quarter of 2024, you can find additional details and information in the financial statements.

Cody: Notes and management's discussion and analysis that were filed on Form 10-Q last night.

Speaker Change: Revenue for the quarter was $252 million down $5 million from the same period in 2023.

Frank Renda: The EPA recently updated its Clean Water Infrastructure Needs Survey which estimates that $630 billion is going to be needed to be spent over the next 20 years just to address water quality objectives of the Clean Water Act. To put this in the perspective, the estimate 10 years ago was $271 billion. We are ranked third in water transmission lines and in the top 10 in water supply and water treatment plants by engineering news records source books rankings.

Speaker Change: Gross loss for the second quarter was $40 million compared to a gross loss of $34 million for the same period in 2023.

Speaker Change: Gross profit margin in the quarter was negative 16% compared to negative 13% for the same period the prior year.

Cody Gallarda: Selling, general, and administrative costs in the second quarter were $15.7 million, a decrease of $700,000 compared to the same period in 2023. Interest expense for the quarter was $6.7 million, an increase of $2.4 million, compared to the same period in 2023. The difference was attributable to increased borrowing costs and a higher debt balance.

Speaker Change: Selling general and administrative costs in the second quarter were $15 $7 million.

Speaker Change: A decrease of $700000 compared to the same period in 2023.

Speaker Change: Interest expense for the quarter was $6 7 million.

Frank Renda: We are well positioned to help improve North America's water infrastructure in an environment where there are a few competitors that operate in the scale we do. We have active water projects across the U.S, from Florida all the way to Oregon and several core markets in between. We also have several water resource projects and large metro areas in Canada. There are not many water contractors that have the technical expertise scale and geographic footprint that we have.

Speaker Change: An increase of $2 4 million compared to the same period in 2023.

Difference was attributable to increased borrowing costs and higher debt balances.

Cody Gallarda: The income tax benefit was $16 million for the quarter compared to a benefit of $19 million in the same period last year. We expect our 2024 annual effective tax rate to be in the 20% to 24% range, depending on certain tax credits, non-deductible items, and certain state and local taxes. We reported a net loss of $46 million, or negative 96 cents per share, in the quarter, compared to a net loss of $13 million, or negative $0.27 per share, in the same period last year.

Speaker Change: Income tax benefit was $16 million for the quarter compared to a benefit of $19 million for the same period last year.

Speaker Change: We expect our 2024 annual effective tax rate to be in the 20% to 24% range, depending on certain tax credits nondeductible items and certain state and local taxes.

Frank Renda: This gives us a true competitive advantage to capitalize on these opportunities. We are also seeing increased bidding opportunities from the IIA which is providing a major tailwind for our pipeline. We are in the early innings of this impact the act will have on our results. We believe the IIA will provide significant opportunities for the next decade. And we are positioning ourselves to capitalize on these opportunities from the IIA and the near term.

Speaker Change: We reported a net loss of $46 million or negative <unk> 96 per share in the quarter.

Speaker Change: Compared to a net loss of $13 million.

Speaker Change: Or negative <unk> 27 per share for the same period last year.

Speaker Change: We reported an adjusted net loss of $46 million in the quarter or negative <unk> 96 per share, which compares to an adjusted net loss.

Frank Renda: We are focused on remaining discipline and choosing projects that fit our teams very well. We also continue to bid on projects with very limited competition given the strong demand, favorable competitive landscape and improvement in our balance sheet. We are optimistic about potential for long-term margin expansion as we continue to work through our legacy projects and our newer work with great bid margin continues to come online.

Cody Gallarda: We reported an adjusted net loss of $46 million in the quarter, for negative 96 cents per share, which compares to an adjusted net loss of $35 million, or negative 76 cents per share, in the same period last year after removing the non-cash benefit from eliminating the contingent earn out liability and transaction related expenses in the second quarter of 2023. In the second quarter, we produced EBITDA, or Earnings Before Interest, Taxes, Depreciation, and Amortization, of negative $49.9 million, compared to EBITDA of negative $19.1 million for the same period in 2020.

$35 million or negative <unk> 76 per share in the same period last year after removing the noncash benefit from eliminating the contingent earn out liability and transaction related expenses in the second quarter of 2023.

Speaker Change: In the second quarter, we produced EBITDA or earnings before interest taxes, depreciation and amortization of negative $49 9 million compared.

Speaker Change: Compared to EBITDA of negative $19 1 million for the same period of 2023, we.

Frank Renda: In summary, we face several challenges this quarter, largely driven by the impact settling legacy disputes had on our income statement. We are encouraged by the cash flow improvement of the business, the strategic actions taken to strengthen our balance sheet, and the substantial backlog and new project awards that position us well for the future. Our focus remains on executing our core business effectively, capitalizing on the opportunities presented by the IAJA and driving long-term margin expansion.

Cody Gallarda: We recorded and adjusted EBITDA of negative $49.9 million in the quarter, which compares to adjusted EBITDA of negative $42.2 million for the same period in 2023 after removing the non-cash benefit from eliminating the contingent earn out liability and transaction related expenses in the second quarter of 2023. Now to touch on segment performance for the quarter. Our civil segment had revenues of $79 million, an increase of $14 million from the same period in 2023.

Speaker Change: We reported adjusted EBITDA.

Speaker Change: A negative $49 9 million in the quarter, which compares to adjusted EBITDA of negative $42 2 million for the same period of 2023 after removing the noncash benefit from eliminating the contingent earn out liability and transaction related expenses in the second quarter of 2023.

Cody Gallarda: Our civil segment gross profit was $9 million, an increase of $3 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 12 percent compared to 9 percent for the same period in 2023. For the quarter, our transportation segment had revenues of $172 million, a decrease of $19 million from the same period in 2023. Our transportation segment gross loss was $49 million, a decrease from a gross loss of $40 million in the same period in the prior year.

Speaker Change: Now to touch on segment performance for the quarter.

Speaker Change: Our civil segment had revenues of $79 million in.

Speaker Change: An increase of $14 million from the same period in 2023, our civil segment gross profit was $9 million, an increase of $3 million from the same period the prior year.

Cody Gallarda: With that, I will now turn the call over to Cody for a financial update. Thank you, Frank, and good morning, everyone. I will provide an overview of our financial performance during the second quarter of 2024.

Speaker Change: As a percentage of revenue for the quarter, our civil segment had gross profit margin of 12% compared to 9% in the same period in 2023.

Cody Gallarda: You can find additional details and information in the financial statements, footnotes, and management's discussion and analysis that were filed on Form 10Q last night. Revenue for the quarter was $252 million, down 5 million from the same period in 2023. Gross loss for the second quarter was $40 million, compared to a gross loss of $34 million for the same period in 2023. Gross profit margin in the quarter was negative 16 percent compared to negative 13 percent in the same period for the prior year.

Cody Gallarda: As a percentage of revenue for the quarter, our transportation segment had a gross profit margin of negative 29% compared to negative 21% for the same period in 2023. The materials and paving business line contributed $9 million to revenue and negative $47 million to gross profit in the second quarter. This was primarily related to unfavorable adjustments.

Speaker Change: For the quarter, our transportation segment had revenues of $172 million, a decrease of $19 million from the same period in 2023.

Speaker Change: Our transportation segment gross loss was $49 million.

Speaker Change: A decrease from a gross loss of $40 million for the same period the prior year.

Speaker Change: As a percentage of revenue for the quarter, our transportation segment had a gross profit margin of negative 29% compared to negative 21% for the same period in 2023.

Cody Gallarda: Selling, general, and administrative costs in the second quarter were $15.7 million, a decrease of $700,000 compared to the same period in 2023. Interest expense for the quarter was $6.7 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. Income tax benefit was $16 million for the quarter, compared to a benefit of $19 million in the same period last year.

Speaker Change: <unk> business line contributed $9 million to revenue and negative $47 million to gross profit.

Speaker Change: In the second quarter. This was primarily related to unfavorable adjustments.

Cody Gallarda: $40 million in connection with dispute settlements that will produce a substantial amount of cash to be collected in the third quarter. We still anticipate we will be substantially complete with MNP projects by mid 2025. The remaining M&P backlog is just under $200 million, or 7% of our total backlog. The unfavorable adjustments of $47 million in the quarter resulted in lowering the percentage of work completed on certain projects.

Speaker Change: A $40 million in connection with dispute settlements that will produce a substantial amount of cash to be collected in the third quarter.

Speaker Change: We still anticipate we will be substantially complete with MMP projects by mid 2025 the.

Speaker Change: The remaining MMP backlog is just under $200 million.

Speaker Change: Or 7% of our total backlog.

Cody Gallarda: We expect our 2024 annual effective tax rate to be in the 20 percent to 24 percent range, depending on certain tax credits, non-aductal items, and certain state and local taxes. We reported a net loss of $46 million or negative 96 cents per share in the quarter, compared to a net loss of $13 million or negative 27 cents per share in the same period last year. We reported an adjusted net loss of $46 million in the quarter or negative 96 cents per share, which compares to an adjusted net loss of $35 million or negative 76 cents per share in the same period last year after removing the non-cash benefit from eliminating the contingent turnout liability and transaction-related expenses in the second quarter of 2023.

Speaker Change: Unfavorable adjustments of $47 million in the quarter resulted in lowering the percentage of work completed on certain projects.

Cody Gallarda: The accounting treatment results in a derecognition of revenue in the current period. However, this result does not impact the mid-2025 schedule to reach substantial completion on the remaining M&P projects. Our core operating results in the transportation segment, which excludes materials and paving, would have been $163 million of revenue and negative $2 million of gross profit for a gross profit margin of negative 1%. We had an unfavorable adjustment on a legacy bridge project in the Midwest, which affected core results by negative $17 million in the quarter.

Speaker Change: The accounting treatment results in a de recognition of revenue in the current period. This result does not impact the mid 2025 scheduled to reach substantial completion on the remaining MVP projects.

Speaker Change: Our core operating results for the transportation segment.

Which exclude materials and paving would have been $163 million of revenue and negative $2 million of gross profit for a gross profit margin of negative 1%.

Speaker Change: We had an unfavorable adjustment on a legacy bridge project in the Midwest, which affected core results by negative $17 million in the quarter.

Cody Gallarda: Consolidated Core Results in the Quarter [inaudible], which excludes materials and paving, would have been $243 million of revenue and $7 million of gross profit for a gross profit margin of 3%. Turning to the balance sheet, as of June 30, 2024, we had a net debt of $239 million, inclusive of cash and restricted cash of $69 million. As of June 30, 2024, we reclassified approximately $90 million of debt from long-term to short-term as our revolving credit facility will prospect the Chairs on April 15 to 2025.

Speaker Change: Consolidated core results in the quarter.

Speaker Change: Which excludes materials and pay rates would have been $243 million of revenue and $7 million of gross profit for our gross profit margin of 3%.

Cody Gallarda: In the second quarter, we produced EBITDA or earnings before interest, taxes, depreciation, and amortization of negative $49.9 million compared to EBITDA of negative 19.1 million dollars for the same period of 2023. We reported an adjusted EBITDA of negative 49.9 million dollars in the quarter, which compares to an adjusted EBITDA of negative 42.2 million dollars for the same period in 2023 after removing the non-cash benefit from eliminating the contingent turnout liability and transaction-related expenses in the second quarter of 2023.

Speaker Change: Turning to the balance sheet as of June 32024, we had net debt of $239 million.

Speaker Change: Inclusive of cash and restricted cash of $69 million.

Speaker Change: As of June 32024, we reclassified approximately $90 million of debt from long term to short term as our revolving credit facility with prospect matures on April 15th 2025.

Cody Gallarda: On August 9, 2024, we secured a term sheet with a new lender that will refinance approximately $110 million of our existing debt into a new long-term facility. We will announce additional details on this new debt structure when the transaction is finalized, which we expect to occur before we announce our third quarter results. As Frank highlighted, we have made significant strides in strengthening our balance sheet to support the opportunities we see in front of us. We had a strong quarter of cash flow from operations.

Speaker Change: On August 19, 2024, we executed a term sheet with a new lender that will refinance approximately $110 million of our existing debt.

Cody Gallarda: Now to touch on segment performance for the quarter. Our civil segment had revenues of $79 million and increase of $14 million from the same period in 2023. Our civil segment gross profit was $9 million and increase of $3 million from the same period in the prior year.

Speaker Change: A new long term facility.

Speaker Change: We will announce additional details on this new debt structure when the transaction is finalized which we expect to occur before we announce our third quarter results.

Cody Gallarda: As a percentage of revenue for the quarter, our civil segment had gross profit margin of 12%, compared to 9% in the same period in 2023. For the quarter, our transportation segment had revenues of $172 million, a decrease of $19 million from the same period in 2023. Our transportation segment gross loss was $49 million, a decrease from a gross loss of $40 million in the same period in the prior year.

Speaker Change: As Frank highlighted we have made significant strides in strengthening our balance sheet to support the opportunities we see in front of US we had a strong quarter of cash flow from operations of $27 million driven.

Cody Gallarda: As a percentage of revenue for the quarter, our transportation segment had a gross profit margin of negative 29%, compared to negative 21% for the same period in 2023. The materials and paving business line contributed $9 million to revenue and negative $47 million to gross profit in the second quarter. This was primarily related to unfavorable adjustments of $40 million in connection with dispute settlements that will produce a substantial amount of cash to be collected in the third quarter.

Cody Gallarda: $27 million, driven by our core business. We added $25 million of net proceeds from a real estate transaction, and we will receive $58 million of cash from dispute settlements in the third quarter. And we expect to receive additional proceeds from the debt refinance transaction for which we anticipate closing before we release next quarter's results. Further, we remain optimistic about the potential significant future cash inflows from disputes and change order settlements that stem from our legacy project and continued strong performance in our new core project. Thank you for your time and interest in Southland.

Frank: Driven by our core business, we added $25 million of net proceeds from a real estate transaction and we will receive $58 million of cash from dispute settlements in the third quarter.

Frank: And we expect to receive additional proceeds from the debt refinance transaction for which we anticipate closing before we release next quarter's results.

Frank: Further we remain optimistic for the potential significant future cash inflows from disputes and change order settlements that stemmed from our legacy projects.

Frank: And continued strong performance at our new core projects.

Speaker Change: Thank you for your time and interest in southwest I'll now pass the call back to the operator for questions.

Operator: I'll now pass the call back to the operator. Thank you. Ladies and gentlemen, we will now begin with a question-and-answer session. Should you have a question, please, press the star followed by the number one on your touch screen. You will hear a prompt that your time has been raised. Should you wish to decline from the polling process, please press the star followed by the number 3.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer your questions should you have a question. Please press <unk>.

Cody Gallarda: We still anticipate we will be substantially complete with M&P projects by mid 2025. The remaining M&P backlog is just under $200 million or 7% of our total backlog. The unfavorable adjustments are $47 million in the quarter resulted in lowering the percentage of work completed on certain projects. The accounting treatment results in a due recognition of revenue in the current period. This result does not impact the mid 2025 schedule to reach substantial completion on the remaining M&P projects.

Speaker Change: Followed with the number one on your touch.

Speaker Change: Given the euro tranche has been rate.

Speaker Change: Should you wish to decline from the closing process.

Speaker Change: <unk> made the numbers.

Operator: If you are using a speakerphone, please leave the handset before pressing One moment, please, for your first question. Our first question is coming from Adam Thalhimer from Thompson Davis. Hey, good morning, guys. Good morning Adam.

Speaker Change: If you are using a speaker phone. Please please go ahead.

Speaker Change: One moment. Please for your first question.

Speaker Change: Our first question is coming from Adam <unk> from something David.

Adam: Hey, good morning, guys.

Frank Renda: I wanted to ask about the civil segment. There was a nice sequential increase in backlog there. When does that start to flow into revenue? Yeah, I think we're starting to see more and more on the civil side, and, uh, third and fourth quarter; we expect upticks from the civil business to start flowing into revenue in those quarters, quarters beyond, getting closer on the new work. We also continue to see the business performing really well.

Cody Gallarda: Our core operating results in the transportation segment which excluded materials and paving would have been $163 million of revenue and negative $2 million of gross profit for a gross profit margin of negative 1%. We had an unfavorable adjustment on a legacy bridge project in the Midwest which affected core results by negative $17 million in the quarter.

Adam: Good morning, Adam.

I wanted to ask about the civil segment nice sequential increase in backlog there.

Adam: When does that start to flow into revenue.

Speaker Change: Yes, I think we're starting to see more and more and more on the on the civil side.

Adam: Yes.

Speaker Change: Third and fourth quarter, we expect upticks.

Speaker Change: From the civil business starting to flow into into revenue.

Cody Gallarda: Consolidated core results in the quarter which excludes materials and paving would have been $243 million of revenue and $7 million of gross profit for a gross profit margin of 3%.

Speaker Change: And this quarter some quarters beyond so.

Speaker Change: Getting getting closer on the new work.

We also.

Speaker Change: Continue to see the business performing really well and revenues up 21% from last year. In this segment margins were up from 9% to 11, 5% this year and the civil backlog is up 38% from year end. So all of these.

Frank Renda: Revenue is up 21% from last year in this segment. Margins were up from 9% to 11.5% this year. And the civil backlog is up 38% from year end. So all these trends, we expect to start showing revenue in the coming quarters. Great, and then, um...

Cody Gallarda: Turning to the balance sheet, as of June 30, 2024, we had net debt of $239 million, inclusive of cash and restricted cash of $69 million. As of June 30, 2024, we reclassified approximately $90 million of debt from long term to short term as our revolving credit facility with prospect which was on April 15, 2025.

Speaker Change: All of these trends, we expect to start showing revenue.

Speaker Change: In the coming quarters.

Speaker Change: Yes.

Speaker Change: Great and then.

Cody Gallarda: The remaining M and P backlog, do you have any sense, should we just straight line the recognition of that over the next four quarters, or does it flow through differently? Hey Adam, it will be heavier weighted towards Q3 and Q4 as we expect some of those remaining projects will be substantially complete by year end with a small number trailing into 2025. So of that 200 million in backlogs left, it's definitely weighted closer rather than further. Okay. And then, I don't know how much detail you can give, but you know, the $58 million is great news. Just curious.

Speaker Change: The remaining in backlog do you have any sense or should we just straight line the recognition of that over the next four quarters or does it flow through differently from that.

Cody Gallarda: On August 9, 2024, we executed the term sheet with a new lender that will refinance approximately $110 million of our existing debt into a new long term facility. We will announce additional details on this new debt structure when the transaction is finalized which we expect to occur before we announce our third quarter was... As Frank highlighted, we have made significant strides in strengthening our balance sheet to support the opportunities we see in front of us. We had a strong quarter of cash flow from operations of $27 million driven by our core business.

Speaker Change: Hey, Adam it will be heavier weighted towards Q3 and Q4 as we expect some of those remaining projects will be substantially complete by year end with a small number trailing into 2025 so.

Of that $200 million in backlog left.

Speaker Change: It's definitely weighted closer rather than further.

Speaker Change: Okay.

Speaker Change: And then I.

Speaker Change: I don't know how much detail you can give but the $58 million great news just curious.

Frank Renda: If you can touch on the ongoing discussions and the potential for more settlement in the coming quarter. Yeah, you know, $58 million helps a lot on claims that we've talked about in the past. A lot of these disputes have built up as a result of COVID.

Speaker Change: If you can touch on the ongoing discussions and the potential for for more settlements.

Speaker Change: In the coming quarters.

Speaker Change: Yes $58 million.

Speaker Change: Helps a lot on claims that we've talked about in the past a lot of these disputes are built up as a result from Covid Lauder.

Cody Gallarda: For which we anticipate closing before we release next quarter's results. Further, we remain optimistic for the potential significant future cash inflows from disputes and change order settlements that stem from our legacy projects and continued strong performance in our new core projects.

Frank Renda: A lot of the owners weren't in the office, and we had to self-finance a lot of these projects through COVID, and we are going to go after all the money we have earned. We're starting to really make progress on getting to the table on a lot of these claims. We have a mediation with the City of Charlotte, which is one of the larger claims this week, and several more as we progress into the back half of the year.

Speaker Change: A lot of the owners Werent the office and we have self finance a lot of these projects through Covid and we are going to go after all the money we emerge we're starting to really make progress on getting to the table on a lot of these claims we have a mediation with the city of Charlotte, which is one of the larger claims this week and several more as we progress into the <unk>.

Cody Gallarda: Thank you for your time and interest in Southland.

Nicole: I'll now pass the call back to the operator for questions. Thank you.

Frank Renda: Approximately half of our CIE balance is on projects we are substantially complete on, so we believe we're going to generate a significant amount of cash from these in the coming quarters. And this, the money that we've collected, is going to allow us to vigorously pursue these claims. Good news. Thank you, Frank. Thanks Adam. Our next question will be from Christian Schwab from Craig Halden Company. Hey, good morning, guys.

Speaker Change: Half of the year.

Speaker Change: Approximately half of our Cie balance is on projects, we are substantially complete.

Nicole: Ladies and gentlemen, we will now begin with a question and answer session. Should you have a question, please press the star followed with the number one under such a phone. You will hear a prompt that your hand has been raised.

Speaker Change: So we believe we're going to generate a significant amount of cash from these in the coming quarters.

Speaker Change: This the money that we've collected is going to allow us to vigorously pursue these claims.

Nicole: Should you wish to decline from the polling process, please press the star followed with the number two. If you are using a speaker phone, please leave the hand set before pressing any seat.

Frank: Thank you Frank.

Adam: Thanks, Adam.

Nicole: One moment please for your first question.

Speaker Change: Our next question will be coming from Christian Schwab from Craig Hallum capital.

Adam Thalhimer: Our first question is coming from Adam Padmer from Samsung Davis. Hey, good morning, guys. Good morning, Adam or Adam.

Christian Schwab: Just for clarification on the disputed contracts, we talked about maybe, you know, $100 million of the $200 million is close to being done. But, and you mentioned, Charlotte, I'm just trying to get an idea of how many projects and how many people you have to negotiate with or for clawbacks, you know, for cash on that $200 million. Is it three or four people?

Christian Schwab: Hey, Hey, good morning, guys just for the clarity.

The disputed contract we talked about maybe.

Adam Thalhimer: I wanted to ask about the civil segment, nice sequential increase and backlog there. When does that start to flow into revenue? I think we are starting to see more and more on the civil side and third and fourth quarter we expect upticks from the civil business starting to flow into revenue in those quarters and quarters beyond. Getting closer on the new work. You know, we also continue to see the business performing really well.

Christian Schwab: Millions of the $200 million close to be done, but and you mentioned Charlotte and I am just trying to get an idea of how many projects and how many people do you have to negotiate with or claw backs.

Speaker Change: For cash of that 200 billion is it three or four people three or four projects is it eight or nine projects I guess it was never really clear.

Christian Schwab: Three or four projects? Is it, you know, eight or nine projects? I guess that was never really clear.

Cody Gallarda: We haven't disclosed a number of projects. We have a handful of claims related to our legacy portfolio, so it is a little lumpy.

Speaker Change: Yes, we haven't disclosed the number of projects, we have a handful of claims related to our legacy portfolio. It is a little lumpy. We did disclose additional details about the city links projects that Frank just mentioned that's the one.

Cody Gallarda: We did disclose additional details about the CityLinks project that Frank just mentioned. That's one of the larger funds that we have out there, and we do expect to be at the table to potentially settle those over the next couple of quarters.

Adam Thalhimer: You know, revenues up 21% from last year in this segment, margins were up from 9% to 11.5% this year and the civil backlog is up 38% from the year end. So all these trends we expect to start showing revenue in the coming quarters, Adam.

Speaker Change: The larger funds that we have out there and we do expect to be at the table to potentially sell those over the next couple of quarters here.

Christian Schwab: So, you know, as far as that 200 million, is there any way for us to roughly, you know, Mac truck, you know, somebody truck the range of cash that we could generate, you know, between now and the end of 2025 and that $200 million for the work? Yeah, so if you look at our contract assets balance, you know, we've called approximately $500 million. We've shared that about half of that is related to claims on projects that are substantially complete. The largest we have out that we disclosed is $115 million against the City of Charlotte.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: As far as that 200 million needs is there any way for us to run.

Speaker Change: Awfully.

Speaker Change: Mack truck semi truck the range of cash that we could generate between now and the end of 2025 and that $200 million worth of work.

Adam Thalhimer: Great, and then the remaining M and P backlog. Do you have any sense, should we just straight line the recognition of that over the next four quarters or does it flow through differently from that? Okay, Adam, it will be heavier weighted towards Q3 and Q4 as we expect some of those remaining projects will be substantially complete by your end with a small number trailing into 2025. So of that 200 million in backlogs left, it's definitely weighted closer rather than further.

Speaker Change: Yes. So if you look at our contract assets balanced we've got call. It approximately $500 million. We've shared about half of that is related to claims on projects that are substantially complete.

Speaker Change: The largest of the <unk>.

Speaker Change: We have out there we disclosed is the $115 million against city of Charlotte.

Cody Gallarda: So we do expect that everything that we have recorded will convert into cash, and we're going to vigorously pursue these claims. So it sounds like you're meeting with them shortly. So, you know, the lion's share of your work, which, in essence, thanks to that clarity, is a message just, you know, one dispute, which we might get clarity on sooner than later, across our fingers. Is that fair? We hope and expect so.

Speaker Change: We do expect that everything that we have recorded we will convert into cash and we're going to vigorously pursue these clients.

Adam Thalhimer: Okay, and then I don't know how much detail you can give, but you know the $58 million is great news. Just curious. If you can touch on the ongoing discussions and the potential for more settlements, and then the coming quarters. Yeah, you know, $58 million helps a lot on claims that, you know, we've talked about in the past. You know, a lot of these disputes have built up as a result from COVID.

Speaker Change: So it sounds like you are meeting with them shortly so.

Speaker Change: No.

Speaker Change: <unk> share of AB.

You work that in essence, thanks for that clarity.

Speaker Change: As in essence.

Speaker Change: Dispute.

Speaker Change: Which we might get clarity on sooner than later cross our fingers is that fair.

Frank Renda: Christian, we've had very favorable developments on each and every one of these claims over the last couple of quarters. We expect that to continue as owners have now run out of appeal options and are going to have to settle down and get to the table and get these taken care of. With that said, the timing is uncertain, but we're doing everything we can to collect on the money that we've earned as quickly as possible.

Christian Schwab: We hope and expect so Christian we've had very favorable developments on each and every one of these claims over the last couple of quarters. We expect for that to continue as owners have now run out of fuel options are going to have to settle down and get to the table and get these taken care of with that said the timing is uncertain.

Adam Thalhimer: A lot of the owners weren't in the office and we have self-finance, a lot of these projects through COVID and we are going to go after all the money we have earned. We're starting to really make progress on getting to the table on a lot of these claims. We have a mediation with the city of Charlotte, which is one of the larger claims this week and several more as we progress into the back half of the year.

Christian Schwab: Everything we can to collect all the money that we've earned as quick as possible.

Frank Renda: And then my last question is, as we think about organic growth, you know, X, you know, legacy COVID disputes, etc. You know, given, you know, the tremendous funding that we've talked about in government stimulus and, you know, the healthiest bidding and project time frame in some time, you know, how should we, you know, think about just your, you know, organic growth on a three to five-year basis now that it seems like we're potentially, hopefully, in the final innings of getting rid of the dispute? Yeah, absolutely. You know, all the markets continue to be really healthy.

Speaker Change: Great and then my last question as we think about organic growth ex.

Adam Thalhimer: Approximately half of our CIE balances on projects, we are substantially complete on. So we believe we're going to generate a significant amount of cash from these in the coming quarters and this, the money that we've collected is going to allow us to vigorously pursue these claims. Good news.

Speaker Change: Legacy Covid disputes et cetera.

Speaker Change: Given the tremendous funding that we've talked about in government stimulus.

Speaker Change: <unk>.

Speaker Change: Bidding.

Speaker Change: Project timeframe in some time.

Adam Thalhimer: Thanks for having me. Thanks, Adam.

Speaker Change: How should we.

Speaker Change: Think about just.

Speaker Change: Organic growth.

Christian Schwab: Our next question will be coming from Chris Chantrol from Creek, Howland, Capitol. Hey, good morning, guys. Just for the clarity on the disputed contracts, we talked about maybe, you know, 100 million of the 200 million is close to be done but in the end you mentioned Charlotte. I'm just trying to get an idea of how many projects and how many people do you have to negotiate with or for clawbacks, you know, for cash on that 200 million?

Speaker Change: Three to five year basis now that it seems like we are.

Speaker Change: Potentially hopefully in the final innings of getting rid of the dispute.

Frank Renda: Civil, we talked about, you know, the last question with a backlog being up 38%. We think there's a, there's a really good chance to expand our civil business, and profile contracts are getting larger on that side. There's a lot of private work still out there on the civil side that we've touched upon that we really haven't pursued in the past. You've got the IIJA, you know, really just in the early innings, and so we expect to see growth potential from that as well. Christian, I would just add to that.

Speaker Change: Yeah, absolutely all of the markets continue to be really healthy civil we talked about the.

Speaker Change: Last question with the backlog being up 38%, we think there is a.

Speaker Change: There is a really good chance to expand.

Christian Schwab: Is it three or four people, three or four projects? Is it eight or nine projects? I guess that was never really clear. Yeah, we haven't disclosed a number of projects. We have a handful of claims related to our legacy portfolio. It is a little lumpy. You know, we did disclose additional details about the city links project that Frank just mentioned. That's the one of the larger funds that we have out there and we do expect to be at the table to potentially settle those over the next couple of quarters here.

Speaker Change: Our civil business and profile contracts are getting larger on that side.

Speaker Change: There is a lot of private work.

Speaker Change: Still out there on the civil side that we've touched upon that we really haven't.

Speaker Change: Pursued in the past.

Speaker Change: <unk> got the only really just in the early innings and so we would expect to see growth potential from.

Speaker Change: From that as well.

Frank Renda: And I expect the market we're in right now is definitely supportive of expanding the book to bill ratio for the foreseeable future. It's really just a matter of being selective and getting the best return we can and choosing the right projects to go after, because they're out there. And then, you know, when you guys keep public, you talked about, you know, some of these civil stuff in particular, kind of a low win rate and kind of focusing on the work you want to do, where we have the machines and the people, etc., and the infrastructure in place.

Speaker Change: I would just add on to that and I expect the market. We're in right now is definitely supportive.

Christian Schwab: Okay. So, you know, as far as that 200 million, is there any way for us to roughly, you know, MAC truck, you know, semi truck the range of cash that we could generate, you know, between now and the end of 2025 and that $200 million for the work? Yeah. So, if you look at our contract assets balance, you know, we've you know, called approximately 500 million. We share about half of that is related to claims on projects that are substantially complete.

Speaker Change: Expanding book to Bill ratio for the foreseeable future, it's really just a matter of being selective and getting the best return we can.

Speaker Change: In choosing the right projects to go after that are out there.

Speaker Change: And then when you guys came public you talked about some of the civil stuff in particular.

Speaker Change: And have a low win rate and kind of focusing on the work you wanted to do.

Christian Schwab: The largest that the largest we have out there, we disclose is the 115 million against city of Charlotte. So, we do expect that everything that we have recorded, we will convert into cash and we're going to vigorously pursue these claims. So, it sounds like you're meeting with them shortly. So, you know, the lion's share of your work that in essence, thanks for that clarity, is in essence just, you know, one dispute which we might get clarity on sooner than later across our fingers, is that fair?

Speaker Change: We're where we got the machines and the people et cetera, and the infrastructure in place.

Frank Renda: Has anything, you know, changed in that, or would you say that still remains a core competency of the company? You know, there's a tremendous amount of supply. So we're really able to get into the best contract terms for owners that we've worked for in the past with limited competition. We rarely see more than one or two bidders now.

Speaker Change: Anything.

Speaker Change: Changed in in that or would you say then still remains a core competency of the company.

Speaker Change: Now I'll still still remains a core competency of the company.

Speaker Change: There is there's a tremendous amount of supply so we're really able to get into the best contract terms for <unk>.

Speaker Change: Owners that.

Speaker Change: We've worked for in the past.

Speaker Change: With limited competition.

Christian Schwab: We hope and expect so. Christian, we've had very favorable developments on on each and every one of these claims over the last couple quarters. We expect for that to continue as others have now run out of appeal options, we're going to have to settle down and get to the table and get these taken care of. With that said, the timing is uncertain, but we're going to have everything we can to collect on the money that we've earned as quick as possible.

Speaker Change: Rarely.

We rarely see more than one or two bidders now so so since we've become public bidding field has gotten.

Frank Renda: So since we've become public, the bidding field has gotten, gotten even better, but we have remained extremely, extremely distant. Fantastic. No other questions. Thank you. Thanks, Christian.

Speaker Change: Gotten even even better but we were we have remained.

Speaker Change: Remained extremely extremely disciplined.

Speaker Change: Fantastic no other questions. Thank you.

Christian Schwab: Thanks Christian.

Christian Schwab: Great. And then my last question is, is we think about organic growth, you know, ex, you know, legacy COVID disputes, et cetera, you know, given, you know, the tremendous funding that we've talked about in government stimulus and the, you know, healthiest bidding project timeframe and some time, you know, how should we, you know, think about just, you know, organic growth, you know, on a three to five year basis now that it seems like we're potentially hopefully in, you know, in the final innings of getting rid of the dispute.

Operator: The next question in line will be from Julio Romero from Tidoti & Company. Thanks. Hey, good morning, Frank, Cody, and Alex.

Christian Schwab: Next question in line will be coming from Julio Romero from Sidoti <unk> Company.

Julio Romero: Maybe, you know, staying on the contract disputes for a little bit. You talked about the mediation with Charlotte going on this week, that seems like there'll be some resolution in the near term. Just help us think about, you know, what are the chances that these contract disputes get settled in year 25 instead of year 24 and thus lead to gross losses in year 25? You know, Julio, to backtrack a little bit, most of these claims, actually, are from projects that were bid in 2018 and 2019.

Julio Romero: Thanks, Hey, good morning, Frank Odeon, Alex maybe staying on the contract disputes for a little bit you talked about the mediation with Charlotte going on this week that seems like there'll be some resolution in the near term.

Speaker Change: Just help us think about what are the chances that these contract disputes get settled in in year 'twenty five instead of <unk> 24, and thus lead to two.

Speaker Change: Gross losses and 25.

Speaker Change: Julio to backtrack, a little bit most of these claims almost all of these claims actually or.

Christian Schwab: Yeah, absolutely, you know, all the markets continue to be really healthy. Civil, we talked about, you know, the last question with backlog being up 38%. We think there's a, there's a really good chance to expand, you know, our civil business and profile contracts are getting larger on that side. A lot, you know, there's a lot of private work still out there on the civil side that we've touched upon that we really haven't, you know, pursued in the past.

Speaker Change: Projects that were bid in 2018 in 2019.

Julio Romero: So like Cody mentioned, we've gone through the appeals process. We're getting closer and closer to, and are going to continue to fight for all that we've had to self-finance and all the money that we've earned on these projects. Okay, okay. And then... I guess back to Adam's question from earlier: the amount of revenue burned from MMP this quarter was only $9 million. Why was that again?

Speaker Change: So Cody mentioned, we've gone through the appeals process.

Speaker Change: We're getting we're getting closer and closer.

Speaker Change: We are going to go.

Speaker Change: Going to continue to fight for all that we've had to self finance and all the money that debt.

Speaker Change: That we've earned on these projects.

Speaker Change: Okay, Okay and then.

Adam: I guess back to Adam's question from earlier.

Christian Schwab: You've got the IJA, you know, really just in the early innings, and so we expect to see growth potential from, from that, that as well. Yeah, Christian, I would just add on to that and I expect the market we're in right now is definitely, you know, supportive of, of a expanding book to Bill Ratio, the foreseeable future. It's really just a matter of being selective and getting the best return we can and choosing the right projects to go after that, that are out there.

Speaker Change: The amount of revenue burned from MMP this quarter was only $9 million.

Speaker Change: Why was that again.

Frank Renda: Yes, so part of this settlement that we discussed resulted in lowering the percentage of completion on the project, which causes a de-recognition of revenue from prior periods. So that's an artificially lower number that does not correlate to the operational progress we made on the MNP portfolio. We still expect to be substantially complete with all M&P by mid-2025. Okay, okay. I appreciate that clarity. And then, assuming there's no further derecognition from the contract resolutions in the third quarter, a good portion of it gets taken out in the 3rd Q. Is that fair?

Yes, so part of the settlement that we discussed resulted in lowering the percentage of completion on the project which causes.

Speaker Change: De recognition of revenue from prior periods. So that's an artificially lower number that does not correlate to the operational progress we made on the MMP.

Speaker Change: Portfolio, we still expect to be substantially complete with all the MLP by mid 2025.

Christian Schwab: And then, you know, when you guys came public, you talked about, you know, on some of these civil stuff in particular, you know, kind of a low wind rate and kind of focusing on the work you wanted to, where we got the machines and the people, et cetera, and the infrastructure in place. Anything, you know, changed in that, or would you say that still remains a core competency of the company? No, still remains a core competency of the company.

Speaker Change: Okay. Okay I appreciate that clarity and then assuming there is no further de recognition.

Speaker Change: From the contract resolutions in the third quarter are.

Speaker Change: A good portion of it gets taken out in <unk>.

Speaker Change: That fair.

Speaker Change: Of what's remaining okay.

Cody Gallarda: That's correct. Of what's remaining, okay? Okay. And then, you know, congrats on the term sheet signed for the $110 million in refinancing. Assuming that closes, how does that affect your gap interest expense dollars for maybe the fourth quarter, for example?

Speaker Change: Okay and then.

Speaker Change: Congrats on the term sheet signed for the $110 million of refinancing.

Speaker Change: Assuming that closes how does that affect your GAAP interest expense dollars.

Speaker Change: For maybe the fourth quarter for example.

Cody Gallarda: Yeah, so we'll have more information as that unfolds and we finalize that transaction. As we disclosed on the prior call, you know, we're looking at structures that preserve cash flow for debt service that, in this environment, may come at the risk of higher interest rates or naturally come with higher interest rates but will support our working capital position better than the existing fully amortizing term cap structures we've had in the past.

Christian Schwab: You know, there's a tremendous amount of supply, so we're really able to get into the best contract terms for owners that, you know, we've worked for in the past with limited competition. You know, we've rarely, we've rarely seen more than one or two bidders now, so since we've become public, you know, the bidding field has gotten, you know, gotten even better, but we are remained extremely, extremely disciplined. Fantastic. No other questions.

Speaker Change: Yeah, So we'll have more information.

Speaker Change: That unfolds and we finalize that transaction as we disclosed on the prior call. We're looking at structures that preserve cash flow for debt service that in this environment may come at the risk of higher interest rates or naturally come with higher interest rates, but will support our working capital position better than the existing fully amortizing term notes.

Christian Schwab: Thank you.

Speaker Change: Structures, we have in the past.

Cody Gallarda: Okay, very good. And then last one for me, it's just, you know, a lot of the companies are calling out, you know, weather impact. Did you guys see any weather in either the second quarter or beginning of the third?

Speaker Change: Okay very good and then last one from me just you know a lot of the other companies are calling out a weather impact.

Speaker Change: Did you guys see any any weather in either the second quarter or beginning of third.

Christian Schwab: Thanks, Christian.

Frank Renda: You know, we did see some higher than normal rain events in some areas, which definitely did impact our work. Notable, you can call it out for July or... No, nothing to add at this point. We'll see how we continue through Q3 and expect to make a tremendous amount of progress on all the projects we have out there. Very good. I'll pass it along.

Speaker Change: Yeah.

Speaker Change: We did.

Julio Romero: Next question in mind will be coming from Holyyear to Merrill from Tidoti and Company. Thanks.

Speaker Change: We did see some higher it is higher than normal.

Speaker Change: Rain events in some areas, which definitely did impact our work.

Julio Romero: Hey, good morning, Frank Cody and Alex. Maybe, you know, staying on the contract disputes for a little bit, you talked about the mediation with Charlotte going on this week that seems like there'll be some resolution in the near term. Just help us think about, you know, what are the chances that these contract disputes get settled in year 25 instead of year 24 and thus lead to gross losses in 25. You know, Julio, to backtrack a little bit, most of these claims, almost all of these claims actually are from projects that were bid in 2018 and 2019.

Speaker Change: Notable you can call out for for July or.

Speaker Change: Yeah.

Speaker Change: No nothing to add at this point, we will see how we continue in through Q3 and expect to make a tremendous amount of progress on all the projects we have out there.

Very good I'll pass it along thanks very much.

Julia: Thanks Julia.

Julio Romero: Thanks very much. Thanks, Julio. Again, should you have a question, please press star followed by the number one on your touchtone phone, and you will hear a prompt that your hand has been raised. Again, if you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt indicating that your hand has been raised.

Speaker Change: And then should you have a question please press star.

Julio Romero: And so, like Cody mentioned, we've gone through the appeals process, we're getting closer and closer and are going to continue to fight for all that we've had to self-finance and all the money that we've earned on these projects. Okay, okay. And then, I guess back to Adam's question from earlier, the amount of revenue burned from MNP, this quarter was only 9 million, just why was that again? Yes, so part of the settlement that we discussed, it resulted in lowering the percentage of completion on the project, which causes the de-recognition of revenue from prior periods.

Speaker Change: I'll go over the number one and you touched on and you will hear from you had a theory.

Speaker Change: Again, if you have a question.

Speaker Change: Our follow up with the number one and you touched on.

Speaker Change: You will hear from Mr. Han has been written.

Operator: The last question in line will be coming from Brent Thielman from BA Davis. Great, thanks. Good morning.

Speaker Change: Last question in line will be coming from Brent Thielman from D. A Davidson.

Great. Thanks, good morning.

Brent Thielman: Cody, could you just let us on the balance sheet? I guess with all the moving pieces and cash collection since the end of the quarter, the sale of these assets, the settlement. I guess you get the real estate transaction. Are you like...

Speaker Change: Cody could you just level set us on the balance sheet I guess with all the moving pieces.

Speaker Change: Cash collection since the end of the corner of the sale lease back to settlement.

Speaker Change: I guess you get the real estate transaction are you like.

Cody Gallarda: Adding to 75 plus million on a pro-forma basis. Yeah, so the real estate transaction as well as the settlement where the cash was not collected in Q2 were reflected; the settlements were reflected in the income statement. That cash was received subsequent to quarter end. So if you look at where we are on a pro forma basis, some of that will go back into working capital to support ongoing operations, but we don't have any further pro forma guidance on that at this point. Then, as Frank mentioned, as part of the real estate transaction, there was a $16 million reduction in debt.

Speaker Change: Okay $75 million on a pro forma basis.

Cody: Yes, so the real estate transaction as well as the settlement where the cash was not collected in Q2 was reflected.

Julio Romero: So, that's an artificially lower number that does not correlate to the operational progress we made on the MNP portfolio. We still expect to be substantially complete with MNP by mid-2025. Okay, okay, I appreciate that clarity. And then, assuming there's no further de-recognition from the contract resolutions in the third quarter, a good portion of it gets taken out in 3Q. Is that fair? That's correct. Of what's remaining? Okay, okay.

Cody: Settlements.

Speaker Change: <unk> in the income statement that cash was received subsequent to quarter end.

Speaker Change: So if you look at where we are on a pro forma basis. Some of that will go back into working capital to support ongoing operations.

Speaker Change: We don't have any further pro forma guidance on that at this point.

Speaker Change: As Frank mentioned as part of the real estate transaction, there was a $16 million reduction of debt. So that transaction netted after debt paydown fees and expenses of about $25 million to the balance sheet.

Cody Gallarda: So that transaction netted, after debt paydown fees and expenses, about $25 million. Appreciate that. And then on the transportation segment, it looked like there might have been some other projects that worked against you to some degree outside of the MMP.

Julio Romero: And then, you know, congrats on the term sheet signed for the 110 million ever financing. Assuming that closes, how does that affect your gap interest expense dollars for maybe the fourth quarter, for example? Yes, so we'll have more information as that unfolds and we finalize that transaction. As we disclose on the prior call, you know, we're looking at structures that preserve cash flow for debt service, that in this environment may come at the risk of higher interest rates or naturally come, you know, with higher interest rates, but we'll support our working capital position better than the existing fully amortizing term health structures we've had in the past. Okay, very good.

Speaker Change: Okay appreciate that.

Speaker Change: And then on the transportation segment.

Speaker Change: It looked like there might have been some other projects that worked against you to some degree outside of the MMP.

Frank Renda: Portfolio, maybe just an update on that, what's happening there, timelines for completion. Yeah. Brent, we have a bridge in the Midwest that we still estimate to be substantially complete with our legacy work in mid-2025. We've gotten through the major milestones on the Midwest bridge project, which had a write-down in the quarter. We had an increase in the estimated cost to finish the project from increased subcontractor costs, and we feel we've captured all the costs associated with this project with the adjustment in the quarter.

Speaker Change: Portfolio, maybe just an update.

Speaker Change: On.

Speaker Change: What's happening there timeline to completion.

Speaker Change: Yes.

Speaker Change: We haven't we have a bridge in the Midwest.

Speaker Change: We still estimate to be substantially complete with our with our legacy work in mid 2025.

Speaker Change: We've gone through the major milestones on the Midwest Bridge project, which had a which had a write down in the quarter.

Julio Romero: And then, last one for me, it's just, you know, a lot of the companies are calling out, you know, a weather impact. Did you guys see any weather in either the second quarter or beginning of third? You know, we did see some higher, higher than normal, you know, rain events in some areas, which definitely did impact our work. You know whatable, you can call out for for July or. No, nothing to add at this point. You will see how we continue in through through two, three and expect to make a tremendous amount of progress on all the projects we have out there. Very good.

Speaker Change: We had an increase in the estimated cost to finish the project fruit increased subcontractor cost.

Speaker Change: And feel we've captured all the cost associated with this project with the adjustment in the quarter.

Speaker Change: It's been a challenging project is another one that we bid prior to Covid.

Frank Renda: It's been a challenging project. It's another one that we bid prior to COVID, but the bridge is scheduled to be open early November. Alright, thanks, Frank, and then um... You're back to this kind of 200-odd million in MNP backlog left to be executed, I guess after these dispute settlements. I mean, what are the remaining risks here associated with executing that work over the next 12 months as it changes orders, weather, and pollution?

Speaker Change: But the bridge is scheduled to be opened early November.

Speaker Change: Alright, Thanks, Frank and then.

Speaker Change: You go back to the just kind of $209 million and MMP backlog left to be executed.

Speaker Change: I guess after these dispute settlements.

Speaker Change: The remaining risks here associated with kind of executing that work over the next.

Nicole: I'll pass it along. Thanks very much. Thank you. And again, should you have a question? The preference are all over the number one on your touch on phone. And you will hear from that your hand has been raised. Again, if you have a question, please press the star, follow up with the number one on your touch phone. You will hear a prompt that your hand has been written.

Speaker Change: 12 months does it change orders whether inflation I'm, just trying to think about how we handicap some risks associated with that.

Brent Thielman: I'm just trying to think about how we got, while I hand myself a cap, some rest still. And Brent, just to clarify your question specific to M&P. That's correct, yeah. Yeah. So we definitely think over the long run, there's potential cash upside on M&P, with the substantial completion of the operational work in the field being done by mid 2025. I do expect there will be ongoing, you know, claim pursuits beyond that. But that will be after the projects are, you know, completely demobbed.

Speaker Change: And Brett just to clarify your question specific to MLP.

Speaker Change: That's correct yes.

Brent Thielman: So there is, you know, risk and settlement and any claim. But we fully expect to collect and to record what we recorded on the balance sheet and think that that will support the overall cash upside potential with M&P.

Speaker Change: Yes, so we definitely think over the long run there's potential cash upside on MMP. The substantial completion of the operational work in the field being done by mid 2025, I do expect that it will be ongoing claw.

Brent Thielman: Last question online will be coming from Brent Thielman from D.A. David's. Great. Thanks.

Speaker Change: Claim pursuits beyond that but that will be after the projects are completely demob. So there is risk in settlement of any claim but.

Cody Gallarda: Good morning. Cody, could you just level set us on the balance sheet? I guess with all the moving pieces and cash collection since the end of the quarter, the sale lease back to settlement, I guess you get the real estate transaction. Are you like, kind of having a 75 plus million on a pro forma basis? Yeah, so the real estate transaction as well as the settlement where the cash was not collected in Q2 was reflected, the settlement was reflected in the income statement, that cash was received subsequent to quarter end.

Speaker Change: But we fully expect to record to collect what we recorded on the balance sheet and think that that will support the overall cash upside potential with <unk>, albeit will come after the completion of the work.

Cody Gallarda: I'll be able to come after the completion of the work. Very good. Thank you. Thank you. There are no further questions at this time. I'd now like to turn the call back over to Mr. Frank Renda for his final closing comments.

Speaker Change: Okay very good thank you.

Speaker Change: Thank you thank you Bruce.

Speaker Change: Yes.

Speaker Change: There are no further questions at this time I would now like to turn the call back over to Mr. Brock Renda upfront milestones.

Speaker Change: Yes.

Cody Gallarda: So if you look at where we are on a pro forma basis, some of that will go back into working capital to support ongoing operations, but we don't have any further pro forma guidance on that at this point. As Frank mentioned, as part of the real estate transaction, there was a $16 million reduction in debt. So that transaction netted after debt paydown fees and expenses about 25 million to the balance sheet.

Frank Renda: Thank you all for joining us today. I want to express my appreciation to our employees for their hard work and commitment to safety, and also to thank our shareholders for their continued trust in us. I'm excited about our growth outlook for the second half of the year and beyond.

Thank you all for joining us today I want to express my appreciation to our employees for their hard work and commitment to safety and also like to thank our shareholders for their continued trust in us I'm excited about our growth outlook in the second half of the year and beyond.

Speaker Change: <unk> you everyone.

Frank Renda: Thank you, everyone. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.

Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating.

Cody Gallarda: Okay, appreciate that. And then on the transportation segment, it looked like there might have been some other projects that worked against you to some degree outside of the M&P portfolio, maybe just an update on what's happening there, timelines to completion. Yeah, Brent, we have a bridge in the Midwest that we still estimate to be substantially complete with our legacy work in mid 2025. We've gotten through the major milestones on the Midwest bridge project, which had a right down in the quarter.

Speaker Change: Disconnect your lines.

Operator: .. .. .. .. ...

Cody Gallarda: We had an increase in the estimated cost to finish the project from increased subcontractor cost and feel we've captured all the costs associated with this project, with the adjustment in the quarter. It's been a challenging project. It's another one that we bid prior to COVID, but the bridge is scheduled to be open early November.

Cody Gallarda: All right, thanks, Frank. And then you're back to the just kind of 200 odd million in M&P backlog, left to be executed. I guess after these disputes, settlements, I mean, what are the remaining risks here associated with kind of executing that work over the next 12 months? Is it change orders, weather, inflation? I'm just trying to think about how we got a handicap somewhere else associated with that. And Brent, just to clarify your question specific to M&P.

Cody Gallarda: That's correct. Yeah. Yeah, so we definitely think over the long run, there's potential cash upside on M&P, the substantial completion of the operational work in the field being done by mid 2025. I do expect there will be ongoing claim pursuits beyond that, but that will be after the projects are completely demoked. So there is risk and settlement and any claim, but we fully expect to collect what we've recorded on the balance sheet and think that that will support the overall cash upside potential with M&P. I'll be able to come after the completion of the work.

Cody Gallarda: Okay, there you go.

Brent Thielman: Thank you. Thank you, Brent.

Nicole: There are no further questions at this time.

Frank Renda: I'd now like to turn the call back over to Mr. Franca Renda for final closing comments. Thank you all for joining us today. I want to express my appreciation to our employees for their hard work and commitment to safety and also like to thank our shareholders for their continued trust in this. I'm excited about our growth outlook in the second half of the year and beyond. Thank you, everyone.

Nicole: Ladies and gentlemen, the weeks concludes your conference call for today.

Nicole: We thank you for participating and ask the police disconnect your line.