Southland Holdings Q4 2024: Navigating Contradictions in Backlog, Cash Flow, and Profit Expectations

These are the key contradictions discussed in Southland Holdings' latest 2024Q4 earnings call, specifically including: Backlog and Burn Off Expectations, Cash Flow Projections, and Gross Profit Impact:



Backlog and Revenue Trends:
- Southland Holdings reported a total backlog of $2.57 billion at the end of Q4, with approximately $750 million in pending alternative delivery contracts.
- Revenue for Q4 was $267 million, down from the previous year, primarily due to unfavorable adjustments from the M&P business and legacy projects.
- The decline in revenue was mainly due to the impact of dispute resolutions and increased completion costs on certain legacy projects.

New Core Projects and Awards:
- Southland's new core projects delivered double-digit margins in Q4, contributing to a significant portion of the backlog.
- The company booked approximately $105 million in new awards during the quarter, including a $60 million wastewater treatment plant in the Southwest.
- The focus on new core projects and disciplined bidding practices are expected to drive long-term success.

Financial Performance and Cash Flow:
- Southland reported a net loss of $4 million for Q4, with an adjusted net loss of $105 million for the full year.
- The company expects to burn approximately 39% of its backlog in 2025, with an optimistic outlook on returning to positive EBITDA by year-end.
- The decline in legacy and M&P backlog, combined with new core project contributions, is anticipated to improve cash flow and financial performance.

Segment Performance and Challenges:
- The Civil segment had revenues of $104 million, with a gross profit margin of 8%, reflecting a decline from the previous year.
- The Transportation segment reported revenues of $163 million, with a gross loss margin of negative 0.2%, indicating improvement from the prior year's negative 1.6%.
- Challenges in the Civil segment stemmed from legacy projects, with a recent milestone in a Midwest bridge project reducing risks.