Quarterly Report for Quarter Ending June 30, 2024 (Form 10-Q)

Table of Contents

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​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2024

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-41090

Southland Holdings, Inc.

(Exact name of registrant as specified in its charter)

​

​	​	​
Delaware		87-1783910
(State or other jurisdiction of incorporation or organization)	​	(IRS Employer Identification No.)

​

1100 Kubota Dr.

Grapevine, TX76051

(Address of principal executive offices) (Zip Code)

(817) 293-4263

(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

​

​	​
​	​
Title of Each Class		Trading Symbol		Name of Each Exchange on Which Registered
Common Stock, par value $0.0001 per share	​	SLND	​	NYSE American LLC
Redeemable warrants, exercisable for shares of common stock at an exercise price of $11.50 per share	​	SLND WS	​	NYSE American LLC

​

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes☐ No

​

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes☐ No

​

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

​

​	​	​	​	​
​	​	​	​	​
​	​	​	​	​
Large accelerated filer	☐	​	Accelerated filer	☐
Non-accelerated filer	☒	​	Smaller reporting company	☒
​	​	​	Emerging growth company	☒

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

​

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

​

As of August 5, 2024, there were 48,105,512 shares of common stock, par value $0.0001 per share, issued and outstanding.

​ ​ ​ ​ ​	​
​ ​ ​	​

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Table of Contents

SOUTHLAND HOLDINGS, INC.

TABLE OF CONTENTS

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​	​
​	Page
PART I - Financial Information	​
ITEM 1. Financial Statements	1
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	30
ITEM 4. Controls and Procedures	30
​	​
PART II - Other Information	31
ITEM 1. Legal Proceedings	31
ITEM 1A. Risk Factors	31
ITEM 5. Other Information	31
ITEM 6. Exhibits	32
Signatures	34
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Table of Contents

Unless otherwise stated in this Quarterly Report on Form 10-Q (this "Quarterly Report"), references to the "Company," "our," "us," "we," or "Southland" refer to Southland Holdings, Inc. and its subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act"), as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements are based on the reasonable beliefs and assumptions of our management. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words "believes," "estimates," "expects," "projects," "forecasts," "may," "will," "should," "seeks," "plans," "scheduled," "anticipates," "intends" or similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about our ability to:

●	Access, collect and use personal data about consumers;

●	Execute our business strategy, including monetization of services provided and expansions in and into existing and new lines of business;

●	Anticipate the uncertainties inherent in the development of new business lines and business strategies;

●	Retain and hire necessary employees;

●	Increase brand awareness;

●	Attract, train and retain effective officers, key employees or directors;

●	Upgrade and maintain information technology systems;

●	Potential disruptions, failures or security breaches of the information technology systems on which we rely to conduct our business;

●	Acquire, develop and protect intellectual property;

●	Meet future liquidity requirements, maintain adequate working capital, and comply with restrictive covenants related to long-term indebtedness;

●	Effectively respond to general economic, socioeconomic and other business conditions;

●	Maintain the listing of our securities on the NYSE American LLC ("NYSE") or another national securities exchange;

●	Obtain additional capital, including use of debt and capital markets;

●	Enhance future operating and financial results;

●	Anticipate rapid technological changes;

●	Comply with laws and regulations applicable to its business, including but not limited to laws and regulations related to data privacy and insurance operations;

●	Stay abreast of modified or new laws and regulations applying to our business;

●	Anticipate the impact of, and respond to, new accounting standards;

●	Anticipate any change in interest rates which would change our cost of capital;

●	Anticipate the significance and timing of contractual obligations;

●	Maintain key strategic relationships with partners and distributors;

●	Respond to uncertainties associated with product and service development and market acceptance;

●	Anticipate the ability of the renewable sector to develop to the size or at the rate it expects;

●	Anticipate the impact of various federal, state, and local government funding initiatives;

●	Manage to finance operations on an economically viable basis;

●	Anticipate the impact of new U.S. federal income tax law, including the impact on deferred tax assets; and

●	Successfully defend, pursue or collect claims and litigation.

​

Forward-looking statements are not guarantees of performance and speak only as of the date hereof. While we believe that these forward-looking statements are reasonable, there can be no assurance that we will achieve or realize these plans, intentions, or expectations. You should understand that the following important factors, in addition to those discussed under the heading "Item 1A. Risk Factors" and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2023 (the "Annual Report"), "Item 1A. Risk Factors" to Part II in this Quarterly Report and other reports or documents we file with the Securities and Exchange Commission ("SEC"), could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements in this Quarterly Report:

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Table of Contents

●	Litigation, complaints, product liability claims and/or adverse publicity;

●	The impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability;

●	Increases and decreases in utility and other energy costs, increased costs related to utility or governmental requirements; and

●	Privacy and data protection laws, privacy or data breaches or the loss of data.

​

These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this Quarterly Report are more fully described under the heading "Item 1A. Risk Factors" in the Annual Report and elsewhere in this Quarterly Report. The risks described under the heading "Item 1A. Risk Factors" in the Annual Report are not exhaustive. Other sections of this Quarterly Report may describe additional factors that could adversely affect our business, financial condition or results of operations. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on the business, nor the extent to which any factor or combination of facts may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In addition, statements of belief and similar statements reflect our reasonable beliefs and opinions on the relevant subject. These statements are based upon information available to us, as applicable, as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, involve risks and are subject to change based on various factors, including those discussed under the headings "Item 1A. Risk Factors and "Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report.

​

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Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SOUTHLAND HOLDINGS, INC.

Condensed Consolidated Balance Sheets (unaudited)

​	​	​	​	​	​
(Amounts in thousands, except share and per share data)	As of
ASSETS	June 30, 2024		December 31, 2023
Current assets	​	​	​	​	​
Cash and cash equivalents	$	52,352	​	$	49,176
Restricted cash		16,817	​		14,644
Accounts receivable, net		244,174	​		194,869
Retainage receivables		123,942	​		109,562
Contract assets		526,379	​		554,202
Other current assets		16,894	​		20,083
Total current assets		980,558	​		942,536
​	​	​	​	​	​
Property and equipment, net		110,992	​		102,150
Right-of-use assets		10,615	​		12,492
Investments - unconsolidated entities		123,883	​		121,648
Investments - limited liability companies		2,590	​		2,590
Investments - private equity		3,115	​		3,235
Deferred tax asset	​	26,910	​	​	11,496
Goodwill		1,528	​		1,528
Intangible assets, net		1,505	​		1,682
Other noncurrent assets		1,711	​		1,711
Total noncurrent assets		282,849	​		258,532
Total assets	$	1,263,407	​	$	1,201,068
​	​	​	​	​	​
LIABILITIES AND EQUITY	​	​	​	​	​
Current liabilities	​	​	​	​	​
Accounts payable	$	248,660	​	$	162,464
Retainage payable		41,688	​		40,950
Accrued liabilities		109,766	​		124,667
Current portion of long-term debt		134,534	​		48,454
Short-term lease liabilities		10,401	​		14,081
Contract liabilities		225,193	​		193,351
Total current liabilities		770,242	​		583,967
​	​	​	​	​	​
Long-term debt		173,239	​		251,906
Long-term lease liabilities		4,543	​		5,246
Deferred tax liabilities		2,017	​		2,548
Long-term accrued liabilities	​	50,081	​	​	49,109
Other noncurrent liabilities		47,735	​		47,728
Total long-term liabilities		277,615	​		356,537
Total liabilities		1,047,857	​		940,504
​	​	​	​	​	​
Commitment and contingencies (Note 7)		​	​		​
​	​	​	​	​	​
Stockholders' equity	​	​	​	​	​
Preferred stock, $0.0001 par value, authorized 50,000,000 shares, none issued and outstanding as of June 30, 2024 and December 31, 2023		-	​		-
Common stock, $0.0001 par value, authorized 500,000,000 shares, 48,105,512 and 47,891,984 issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		5	​		5
Additional paid-in-capital		271,423	​		270,330
Accumulated deficit	​	(65,736)	​	​	(19,253)
Accumulated other comprehensive loss		(2,422)	​		(1,460)
Total stockholders' equity	​	203,270	​	​	249,622
Noncontrolling interest		12,280	​		10,942
Total equity		215,550	​		260,564
Total liabilities and equity	$	1,263,407	​	$	1,201,068

​

See notes to unaudited condensed consolidated financial statements

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Table of Contents

SOUTHLAND HOLDINGS, INC.

Condensed Consolidated Statements of Operations (unaudited)

​	​	​	​	​	​	​	​	​	​	​	​
​	Three Months Ended		Six Months Ended
(Amounts in thousands except shares and per share data)	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Revenue	$	251,512	​	$	256,927	​	$	539,609	​	$	531,756
Cost of construction		291,534	​		290,721	​		559,210	​		546,607
Gross loss		(40,022)	​		(33,794)	​		(19,601)	​		(14,851)
Selling, general, and administrative expenses		15,680	​		16,448	​		30,074	​		32,019
Operating loss		(55,702)	​		(50,242)	​		(49,675)	​		(46,870)
Gain (loss) on investments, net		53	​		50	​		(23)	​		18
Other income, net		1,053	​		24,007	​		1,589	​		21,408
Interest expense		(6,720)	​		(4,305)	​		(12,375)	​		(7,559)
Losses before income taxes		(61,316)	​		(30,490)	​		(60,484)	​		(33,003)
Income tax benefit		(15,961)	​		(18,589)	​		(15,654)	​		(16,836)
Net loss		(45,355)	​		(11,901)	​		(44,830)	​		(16,167)
Net income attributable to noncontrolling interests		722	​		925	​		1,653	​		1,323
Net loss attributable to Southland Stockholders	$	(46,077)	​	$	(12,826)	​	$	(46,483)	​	$	(17,490)
​	​	​	​	​	​	​	​	​	​	​	​
Net loss per share attributable to common stockholders	​	​	​	​	​	​	​	​	​	​	​
Basic	$	(0.96)	​	$	(0.27)	​	$	(0.97)	​	​	(0.38)
Diluted	$	(0.96)	​	$	(0.27)	​	$	(0.97)	​	​	(0.38)
Weighted average shares outstanding	​	​	​	​	​	​	​	​	​	​	​
Basic	​	48,030,951	​	​	46,870,890	​	​	47,978,012	​	​	46,043,878
Diluted	​	48,030,951	​	​	46,870,890	​	​	47,978,012	​	​	46,043,878

​

​

See notes to unaudited condensed consolidated financial statements

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Table of Contents

SOUTHLAND HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Loss (unaudited)

​	​	​	​	​	​	​	​	​	​	​	​
​	Three Months Ended		Six Months Ended
(Amounts in thousands)	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Net loss	$	(45,355)	​	$	(11,901)	​	$	(44,830)	​	$	(16,167)
Foreign currency translation adjustment, net of tax		(696)	​		1,347	​		(1,277)	​		1,853
Comprehensive loss, net of tax	​	(46,051)	​	​	(10,554)	​	​	(46,107)	​	​	(14,314)
Comprehensive income attributable to noncontrolling interest	​	616	​	​	1,124	​	​	1,338	​	​	1,524
Comprehensive loss attributable to Southland Stockholders	$	(46,667)	​	$	(11,678)	​	$	(47,445)	​	$	(15,838)

​

See notes to unaudited condensed consolidated financial statements

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Table of Contents

SOUTHLAND HOLDINGS, INC.

Condensed Consolidated Statements of Equity (unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Shares

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Preferred

​

Common

​

Preferred

Common

​

​

Additional

Accumulated

Members

Noncontrolling

Total

(Amounts in thousands)

​

stock

​

stock

​

Stock

​

Stock

​

AOCI

​

Paid-In Capital

​

Deficit

​

Capital

​

Interest

​

Equity

Balance as of December 31, 2023

​

-

​

47,891,984

​

$

-

​

$

5

​

$

(1,460)

​

$

270,330

​

$

(19,253)

​

$

-

​

$

10,942

​

$

260,564

Issuance of shares - RSUs, net of tax

​

-

​

133,704

​

​

-

​

​

-

​

​

-

​

​

(206)

​

​

-

​

​

-

​

​

-

​

​

(206)

Share Based Compensation

​

-

​

-

​

​

-

​

​

-

​

​

-

​

​

677

​

​

-

​

​

-

​

​

-

​

​

677

Net income (loss)

​

-

​

-

​

-

​

-

​

-

​

-

​

(406)

​

-

​

931

​

525

Other comprehensive loss

​

-

​

-

​

-

​

-

​

(372)

​

-

​

-

​

-

​

(209)

​

(581)

Balance as of March 31, 2024

​

-

​

48,025,688

​

$

-

​

$

5

​

$

(1,832)

​

$

270,801

​

$

(19,659)

​

$

-

​

$

11,664

​

$

260,979

Issuance of shares - RSUs, net of tax

​

-

​

79,824

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

Share Based Compensation

​

-

​

-

​

​

-

​

​

-

​

​

-

​

​

622

​

​

-

​

​

-

​

​

-

​

​

622

Net income (loss)

​

-

​

-

​

-

​

-

​

-

​

-

​

(46,077)

​

-

​

722

​

(45,355)

Other comprehensive loss

​

-

​

-

​

-

​

-

​

(590)

​

-

​

-

​

-

​

(106)

​

(696)

Balance as of June 30, 2024

​

-

​

48,105,512

​

$

-

​

$

5

​

$

(2,422)

​

$

271,423

​

$

(65,736)

​

$

-

​

$

12,280

​

$

215,550

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Shares

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Preferred

​

Common

​

Preferred

Common

​

​

Additional

Accumulated

Members

Noncontrolling

Total

(Amounts in thousands)

​

stock

​

stock

​

Stock

​

Stock

​

AOCI

​

Paid-In Capital

​

Deficit

​

Capital

​

Interest

​

Equity

Balance as of December 31, 2022

​

24,400,000

​

-

​

$

24,400

​

$

-

​

$

(2,576)

​

$

-

​

$

-

​

$

327,614

​

$

10,446

​

$

359,884

Recapitalization

​

-

​

44,407,831

​

​

-

​

​

4

​

​

-

​

​

284,569

​

​

-

​

​

(327,614)

​

​

-

​

​

(43,041)

Balance as of December 31, 2022

​

24,400,000

​

44,407,831

​

​

24,400

​

​

4

​

​

(2,576)

​

​

284,569

​

​

-

​

​

-

​

​

10,446

​

​

316,843

Preferred stock repurchase and dividends

​

(24,400,000)

​

-

​

(24,400)

​

-

​

-

​

(50,129)

​

-

​

-

​

(24)

​

(74,553)

Issuance of post-merger earnout shares

​

-

​

-

​

​

-

​

​

4

​

​

-

​

​

34,996

​

​

-

​

​

-

​

​

-

​

​

35,000

Distributions to joint venture partner

​

-

​

-

​

-

​

-

​

-

​

-

​

-

​

-

​

(110)

​

(110)

Net income (loss)

​

-

​

-

​

-

​

-

​

-

​

-

​

(4,664)

​

-

​

398

​

(4,266)

Other comprehensive income

​

-

​

-

​

-

​

-

​

504

​

-

​

-

​

-

​

2

​

506

Balance as of March 31, 2023

​

-

​

44,407,831

​

$

-

​

$

8

​

$

(2,072)

​

$

269,436

​

$

(4,664)

​

$

-

​

$

10,712

​

$

273,420

Issuance of post-merger earnout shares

​

-

​

3,448,283

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

Net income (loss)

​

-

​

-

​

-

​

-

​

-

​

-

​

(12,826)

​

-

​

925

​

(11,901)

Other comprehensive income

​

-

​

-

​

-

​

-

​

1,149

​

-

​

-

​

-

​

198

​

1,347

Balance as of June 30, 2023

​

-

​

47,856,114

​

$

-

​

$

8

​

$

(923)

​

$

269,436

​

$

(17,490)

​

$

-

​

$

11,835

​

$

262,866

​

​

See notes to unaudited condensed consolidated financial statements

​

​

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SOUTHLAND HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows (unaudited)

​	​	​	​	​	​
​	Six Months Ended
(Amounts in thousands)	June 30, 2024		June 30, 2023
Cash flows from operating activities:	​			​
Net loss	$	(44,830)	​	$	(16,167)
Adjustments to reconcile net loss to net cash used in operating activities		​	​		​
Depreciation and amortization		11,149	​		16,736
Loss on extinguishment of debt	​	111	​	​	-
Deferred taxes		(15,870)	​		(21,866)
Change in fair value of earnout liability	​	-	​	​	(20,689)
Share based compensation	​	1,299	​	​	-
Gain on sale of assets		(2,855)	​		(85)
Foreign currency remeasurement (gain) loss		4	​		(3,641)
Earnings from equity method investments	​	(3,150)	​	​	(140)
TZC investment present value accretion	​	(2,234)	​	​	(1,213)
Loss on trading securities, net		23	​		24
Changes in assets and liabilities:	​	​	​	​	​
Accounts receivable		(64,672)	​		(53,589)
Contract assets		27,398	​		4,803
Other current assets		3,181	​		(4,093)
Right-of-use assets		1,873	​		343
Accounts payable and accrued liabilities		77,204	​		21,700
Contract liabilities		31,851	​		65,774
Operating lease liabilities		(1,608)	​		(126)
Other		(1,340)	​		1,593
Net cash provided by (used in) operating activities		17,534	​		(10,636)
​	​	​	​	​	​
Cash flows from investing activities:			​
Purchase of property and equipment		(4,232)	​		(4,953)
Proceeds from sale of property and equipment		3,206	​		7,214
Contributions to other investments	​	(13)	​	​	(21)
Distributions from other investments		110	​		-
Distributions from investees	​	4,161	​	​	-
Capital contribution to unconsolidated investments		(250)	​		-
Net cash provided by investing activities		2,982	​		2,240
​	​	​	​	​	​
Cash flows from financing activities:			​
Borrowings on revolving credit facility		5,000	​		3,000
Payments on revolving credit facility		(5,000)	​		-
Borrowings on notes payable		24,678	​		248
Payments on notes payable		(36,910)	​		(27,701)
Payments of deferred financing costs		(31)	​		-
Pre-payment premium	​	(111)	​	​	-
Advances from related parties		138	​		215
Payments from related parties		-	​		5
Payments on finance lease		(2,656)	​		(2,396)
Distribution to members		-	​		(110)
Payment of taxes related to net share settlement of RSUs		(206)	​		-
Other	​	-	​	​	17,088
Net cash used in financing activities		(15,098)	​		(9,651)
​	​	​	​	​	​
Effect of exchange rate on cash		(69)	​		164
​	​	​	​	​	​
Net increase (decrease) in cash and cash equivalents and restricted cash		5,349	​		(17,883)
Beginning of period		63,820	​		71,991
End of period	$	69,169	​	$	54,108
​	​	​	​	​	​
Supplemental cash flow information			​
Cash paid for income taxes	$	203	​	$	2,903
Cash paid for interest	$	11,970	​	$	7,541
Non-cash investing and financing activities:			​		​
Lease assets obtained in exchange for new leases	$	4,272	​	$	8,528
Assets obtained in exchange for notes payable	$	16,009	​	$	6,667
Related party payable exchanged for note payable	$	3,797	​	$	-
Issuance of post-merger earn out shares	$	-	​	$	35,000
Dividend financed with notes payable	$	-	​	$	50,000

​

See notes to unaudited condensed consolidated financial statements

5

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SOUTHLAND HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

​

1. Description of Business

Southland Holdings, Inc. and its subsidiaries ("Southland", the "Company", "we", "us", or "our") are a diverse leader in specialty infrastructure construction with roots dating back to 1900. We design and construct projects in the bridges, tunnels, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipelines end markets.

Southland is based in Grapevine, Texas. It is the parent company of Johnson Bros. Corporation, American Bridge Holding Company ("American Bridge"), Oscar Renda Contracting, Southland Contracting, Mole Constructors, Heritage Materials and other affiliates. American Bridge, a builder of specialty construction projects, was acquired in 2020. With the combined capabilities of these six primary subsidiaries and their affiliates, Southland has become a diversified industry leader with both public and private customers. The majority of our customers are located in the United States.

In the second quarter of 2023, Southland decided to discontinue certain types of projects in its Materials & Paving business line ("M&P") and sold assets related to producing large scale concrete and asphalt. M&P is reported in the Transportation segment. The Company will not be pursuing production of concrete and asphalt products for use on self-performed paving projects where the majority of the scope of work contains large-scale concrete and asphalt production or sale of asphalt and concrete products to third parties. This operational shift will allow the Company to better focus its resources on more profitable lines of business. The Company has concluded this action with M&P does not qualify for Discontinued Operations treatment and presentation as it does not represent a strategic shift in the Company's business.

As previously announced, on May 25, 2022, Legato Merger Corp. II, a Delaware corporation ("Legato II"), entered into an Agreement and Plan of Merger (the "Merger Agreement") with Legato Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Legato II ("Merger Sub"), and Southland Holdings LLC, a Texas limited liability company ("Southland LLC").

On February 14, 2023 (the "Closing Date"), as contemplated by the Merger Agreement, Merger Sub merged with and into Southland LLC, with Southland LLC surviving the merger as a wholly owned subsidiary of Legato II (the "Merger"). The transactions contemplated by the Merger Agreement are referred to herein collectively as the "Business Combination." In connection with the Business Combination, Legato II changed its name to "Southland Holdings, Inc."

The Merger was accounted for as a reverse recapitalization with Southland LLC as the accounting acquirer and Legato II as the acquired company for accounting purposes. Accordingly, all historical financial information presented in the consolidated financial statements represents the accounts of Southland and its subsidiaries as if Southland had been the predecessor Company.

2. Basis of Presentation

Consolidated U.S. GAAP Presentation

These interim unaudited condensed consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles ("GAAP"). The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") contains guidance that form GAAP. New guidance is released via Accounting Standards Update ("ASU").

The unaudited condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair

​

6

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presentation of the unaudited condensed consolidated financial statements have been included. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report which was filed on Form 10-K on March 4, 2024.

The accompanying consolidated balance sheet and related disclosures as of December 31, 2023, have been derived from the Form 10-K filed on March 4, 2024. The Company's financial condition as of June 30, 2024, and operating results for the three and six months ended June 30, 2024, are not necessarily indicative of the financial conditions and results of operations that may be expected for any future interim period or for the year ending December 31, 2024.

The unaudited condensed consolidated financial statements include the accounts of Southland Holdings, Inc., and our majority-owned and controlled subsidiaries and affiliates. All significant intercompany transactions are eliminated within the consolidations process. Investments in non-construction related partnerships and less-than-majority owned subsidiaries that we do not control, but where we have significant influence are accounted for under the equity method. Certain construction related joint ventures and partnerships that we do not control, nor do we have significant influence are accounted for under the equity method for the balance sheet and the proportionate consolidation method for the statement of operations.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management periodically evaluates estimates used in the preparation of the consolidated financial statements for continued reasonableness. It is reasonably possible that changes may occur in the near term that would affect our estimates with respect to revenue recognition, the allowance for credit losses, recoverability of unapproved contract modifications, deferred tax assets, and other accounts for which estimates are required.

Cash, Cash Equivalents, and Restricted Cash

We consider all highly liquid instruments purchased with a maturity of three months or less as cash equivalents. We maintain our cash in accounts at certain financial institutions. The majority of our balances exceed federally insured limits.

We have not experienced any losses in these accounts, and we do not believe they are exposed to any significant credit risk.

Restricted cash and cash equivalents consist of amounts held in accounts in our name at certain financial institutions. These accounts are subject to certain control provisions in favor of various surety and insurance companies for purposes of compliance and security perfections.

​

​	​	​	​	​	​
​	​	​	​
(Amounts in thousands)	June 30, 2024		December 31, 2023
Cash and cash equivalents at beginning of period	$	49,176	​	$	57,915
Restricted cash at beginning of period		14,644	​		14,076
Total cash, cash equivalents, and restricted cash at beginning of period	$	63,820	​	$	71,991
​	​	​	​	​	​
Cash and cash equivalents at end of period	$	52,352	​	$	49,176
Restricted cash at end of period		16,817	​		14,644
Total cash, cash equivalents, and restricted cash at end of period	$	69,169	​	$	63,820

​

Goodwill and Indefinite-Lived Intangibles

Goodwill and indefinite-lived intangibles are tested for impairment annually in the fourth quarter, or more frequently if events or circumstances indicate that goodwill or indefinite-lived intangibles may be impaired. We evaluate goodwill at the reporting unit level (operating segment or one level below an operating segment). We identify our reporting unit and determine the carrying value of the reporting unit by assigning the assets and liabilities, including the existing goodwill and indefinite-lived intangibles, to the reporting unit. Our reporting units are based on our organizational and reporting structure. We currently identify threereporting units. We begin with a qualitative assessment using inputs based on our business, our industry, and overall

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macroeconomic factors. If our qualitative assessment deems that the fair value of a reporting unit is more likely than not less than its carrying amount, we then complete a quantitative assessment to determine the fair value of the reporting unit and compare it to the carrying amount of the reporting unit. During the three and six months ended June 30, 2024 and 2023, based on the results of our qualitative assessments which determined that it was more likely than not that the fair value of the reporting units exceeded the carrying amounts and that the fair value of the indefinite-lived intangible assets exceeded the carrying amounts, we did not complete quantitative assessments, and we did not record any impairment of goodwill or indefinite-lived intangible assets.

Valuation of Long-Lived Assets

We review long-lived assets, including finite-lived intangible assets subject to amortization, for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the asset or group of assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to the future net cash flows expected to be generated by the asset or group of assets. If such assets are not considered to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the three and six months ended June 30, 2024 and 2023, we did not identify any triggering events that would require a quantitative assessment.

Accounts Receivable, Net

We provide an allowance for credit losses, which is based upon a review of outstanding receivables, historical collection information, existing economic conditions, and future expectations. Normal contracts receivables are typically due 30 days after the issuance of the invoice. Retainages are due 30 days after completion of the project and acceptance by the contract owner. Warranty retainage receivables, where applicable, are typically due two years after completion of the project and acceptance by the contract owner. Receivables past due more than 120 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluations and specific circumstances of the customer.

As of June 30, 2024, and December 31, 2023, we had an allowance for credit losses of $1.2 million and $1.3 million, respectively.

Recently Issued Accounting Pronouncements

In August 2023, the FASB issued ASU 2023-05, "Business Combinations-Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement" ("ASU 2023-05"), which requires that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value. ASU 2023-05 is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. We plan to adopt ASU 2023-05 in the first quarter of 2025, but do not expect the adoption to have a material impact on our consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06 "Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative," which amends GAAP to include 14 disclosure requirements that are currently required under SEC Regulation S-X or Regulation S-K. Each amendment will be effective on the date on which the SEC removes the related disclosure requirement from SEC Regulation S-X or Registration S-K. The Company has evaluated the new standard and determined that it will have no material impact on its consolidated financial statements or disclosures since the Company is already subject to the relevant SEC disclosure requirements.

In November 2023, FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), which requires expanded disclosure of significant segment expenses and other segment items on an annual and interim basis. ASU 2023-07 is effective for us for annual periods beginning after January 1, 2024 and interim periods beginning after January 1, 2025. We are currently evaluating the impact ASU 2023-07 will have on our consolidated financial statements and related disclosures.

On December 14, 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which established new income tax disclosure requirements. Public business entities must apply the guidance to

8

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annual periods beginning after December 15, 2024. We have not elected to early adopt this standard. We are currently evaluating the impact ASU 2023-09 will have on our consolidated financial statements and related disclosures.

Recent SEC Rules

In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. Unless legal challenges to the rule prevail, this rule will require registrants to disclose certain climate-related information in registration statements and annual reports, and the revisions to Regulation S-X would apply to our financial statements beginning with our fiscal year ending December 31, 2025. We are currently assessing the effect of these new rules on our condensed consolidated financial statements and related disclosures.

Significant Accounting Policies

The significant accounting policies followed by the Company are set forth in Note 2 to the 10-K filed on March 4, 2024, and contained elsewhere herein, other than the policy for warrants, which is included below. For the three and six months ended June 30, 2024, there were no significant changes in our use of estimates or significant accounting policies.

Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments' specific terms and applicable authoritative guidance in FASB ASC 480, "Distinguishing Liabilities from Equity" ("ASC 480"), and ASC 815, "Derivatives and Hedging" ("ASC 815"). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company's own common shares and whether the instrument holders could potentially require "net cash settlement" in a circumstance outside of the Company's control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. The Company has concluded that the public warrants and private warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.

​

3. Recapitalization

As discussed in Note 1 - Description of Business, on the Closing Date, the Company issued 33,793,111shares of common stock to the former members of Southland ("Southland Members") in exchange for their membership interests in Southland ("Southland Membership Interests"). Southland received net proceeds of $17.1million. Transaction costs of $9.9million directly related to the Merger, are included in additional paid-in capital in the condensed consolidated balance sheet as of June 30, 2024.

Prior to the Merger, Southland LLC declared a $50.0million dividend to be payable to Southland Members, which is recorded in other noncurrent liabilities on the condensed consolidated balance sheets. Southland Members, in lieu of cash payment, agreed to receive a promissory note for payment in the future. The notes have a four-yearterm and accrue interest at 7.0%. Southland, at its discretion, may make interim interest and principal payments during the term.

Immediately after giving effect to the Business Combination, there were 44,407,831shares of common stock and 14,385,500warrants, each exercisable for a share of common stock at an exercise price of $11.50per share (including public and private placement warrants) (each a "Warrant" and together, collectively, the "Warrants"), outstanding.

Earnout Shares

Pursuant to the Merger Agreement, Southland Members had the potential to be issued additional consideration of up to 10,344,828 shares of common stock for attaining certain performance targets for the years ended December 31, 2022, and December 31, 2023. On April 27, 2023, Southland issued 3,448,283shares of common stock to the Southland Members pursuant to the attainment of the 2022 Base Target (as defined in the Merger Agreement). Performance targets for December 31, 2023, were not achieved and there are no further issuances to be made under the Merger Agreement. No shares were issued pursuant to the earnout targets for 2023 as neither targets were attained.

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4. Fair Value Investments

Fair value of investments measured on a recurring basis as of June 30, 2024, and December 31, 2023, were as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​
​	As of
​	June 30, 2024
(Amounts in thousands)	Fair Value		Level 1		Level 2		Level 3
Marketable Securities	​			​			​			​
Common stocks	$	-	​	$	-	​	$	-	​	$	-
Total		-	​		-	​		-	​		-
Investments Noncurrent			​			​			​
Private equity		3,115	​		-	​		-	​		3,115
Total noncurrent		3,115	​		-	​		-	​		3,115
Overall Total	$	3,115	​	$	-	​	$	-	​	$	3,115

​

​	​	​	​	​	​	​	​	​	​	​	​
​	As of
​	December 31, 2023
(Amounts in thousands)	Fair Value		Level 1		Level 2		Level 3
Marketable Securities	​			​			​			​
Common stocks	$	-	​	$	-	​	$	-	​	$	-
Total		-	​		-	​		-	​		-
Investments Noncurrent			​			​			​
Private equity		3,235	​		-	​		-	​		3,235
Total noncurrent		3,235	​		-	​		-	​		3,235
Overall Total	$	3,235	​	$	-	​	$	-	​	$	3,235

​

​

​

5. Revenue

Revenue is recognized over time using the input method in accordance with ASC 606, measured by the percentage of cost incurred to date to the estimated total cost for each contract. This method is used because we believe expended cost to be the best available measure of progress on contracts.

Our contracts are primarily in the form of firm fixed-price and fixed-price per unit. A large portion of our contracts have scope defined adequately, which allows us to estimate total contract value upon the signing of a new contract. Upon signing a new contract, we allocate the total consideration across various contractual promises to transfer a distinct good or service to a customer. These are grouped into specific performance obligations. This process requires significant management judgement. Most of our contracts have a single performance obligation. For contracts with multiple performance obligations, we allocate the total transaction price based on the estimated standalone selling price, which is the total project costs plus a budgeted margin percentage, for each of the performance obligations.

Revenue is recognized when, or as, the performance obligations are satisfied. Our contracts do not include a significant financing component. Costs to obtain contracts are generally not significant and are expensed in the period incurred.

Estimating cost to complete of long-term contracts involves a significant amount of estimation and judgement. For long-term contracts, we use the calculated transaction price, estimated cost to complete the project, and the total costs incurred on the project to date to calculate the percentage of the project that is complete. The costs to complete the project and the transaction price can change due to unforeseen events that can either increase or decrease total expected revenues and the estimated margin on a particular project.

Our contract structure allows for variable consideration. A significant portion of this variable consideration comes in the form of change order requests and claims. Other variable consideration can include performance bonuses, incentives, liquidated damages, and other terms that can either raise or lower the total transaction price. We estimate variable consideration based on the probability of being entitled to collection of specific amounts and the estimated amount that we will actually collect. We include amounts that we believe we have an enforceable right to collect, and will actually collect, based on our probability of success with specific claims or contractual rights. Our estimates of total variable consideration rely on all available information about our customer including historical, current, and forecasted information.

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Many of our contracts require contract modifications resulting from a change in contract scope or requirements. Change orders are issued to document changes to the original contract. Our estimated value on contract modifications may or may not be accepted by our customers. We can have approved and unapproved change orders. Unapproved change orders are contract modifications for which we or our customers have not agreed to terms, scope and price. Contract modifications are necessary for many reasons, including but not limited to, changes to the contract specifications or design from the customer, modification to the original scope, changes to engineering drawings, or other required deviation from the original construction plan. Contract modifications may also be necessary for reasons including, but not limited to, other changes to the contract which may be out of our control, such as rain or other weather delays, incomplete, insufficient, inaccurate engineering drawings, different site conditions from information made available during the estimating process, or other reasons. An unapproved change order may turn into a formal claim if we cannot come to an agreement with the owner but are contractually entitled to recovery of costs and profits for work performed. Costs incurred related to contract modifications are included in the estimated costs to complete and are treated as project costs when incurred. Unless the contract modification is distinct from the other goods and services included within the project, the contract modification is accounted for as part of the existing contract. The effect of any modifications on the transaction price, and our measure of the percentage-of-completion on specific performance obligations for which the contract modification relates, is recognized as a cumulative catch-up adjustment to revenue recognized. In some cases, contract modifications may not be fully settled until after the completion of work as specified in the original contract.

We review and update our contract and cost estimates regularly. Any adjustments in estimated profit on contracts is recognized under the cumulative catch-up method. Under this method, the cumulative impact of the profit adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods are then recognized using an updated estimate that uses inputs consisting of costs incurred to date, the estimated transaction price and the estimated remaining costs to be incurred on the project.

If a contract is deemed to be in a loss position, the projected loss is recognized in full, including reversal of any previously recognized margin, in the period in which the change in estimate is made. Losses are recognized as an accrued loss provision on the consolidated balance sheets in the accrued liabilities caption. For contract revenue after the date that the loss is accrued, the accrued loss provision is adjusted so that the gross profit for the contract remains zero in future periods, subject to future adjustments to the overall expected profit or loss as determined at such time. As of June 30, 2024 and December 31, 2023, we had $15.8 million and $17.3 million, respectively, in accrued loss provisions.

As of June 30, 2024 and December 31, 2023, we had $148.8 million and $139.6 million, respectively, of unapproved contract modifications included within our various projects' transaction prices. These modifications are in negotiations with our customers or other third parties.

We estimate the likelihood of collection during the bidding process for new contracts. Customers with history of late or non-payment are avoided in the bidding process. We consider the necessity for write-down of receivable balances in conjunction with GAAP when evaluating our estimates of transaction price and estimated costs to complete our projects.

We bill our customers in conjunction with our contract terms. Our contracts have three main categories, (i) contracts that are billed based on a specific timeline, (ii) contracts that are billed upon the completion of certain phases of work, or milestones, and (iii) contracts that are billed as services are provided. Some of our contracts are billed following the recognition of certain revenue. This creates an asset on our consolidated balance sheets captioned "contract assets." Other contracts' schedules allow us to bill customers prior to recognizing revenue. These contracts create a liability on our consolidated balance sheets captioned "contract liabilities."

We segregate our business into two reportable segments: Transportation and Civil. Our Chief Operating Decision Maker ("CODM") uses these segments in order to operate the business. Our segments offer different specialty infrastructure services. Our CODM regularly reviews our operating and financial performance based on these segments. Each of our reportable segments is composed of similar business units that specialize in specialty infrastructure projects that are unique.

Our business is managed using revenue and gross profit primarily. Our CODM regularly uses this information to review operating results, plan future bids, allocate resources, target customers, and plan future growth and capital allocations. To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs, and indirect operating expenses, were made.

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Our Civil segment is comprised of Oscar Renda Contracting, Inc., Mole Constructors, Inc., Southland Contracting, Inc., Southland Holdings, LLC, Renda Pacific, LLC, Southland Renda JV, Southland RE Properties, Oscar Renda Contracting Canada, Southland Mole of Canada, Southland Technicore Mole joint venture, and Southland Astaldi joint venture. This segment focuses on projects throughout North America that include the design and construction of water pipeline, pump stations, lift stations, water and wastewater treatment plants, concrete and structural steel, outfall, and tunneling.

Our Transportation segment is comprised of American Bridge, Heritage Materials, LLC, and Johnson Bros. Corporation. This segment operates throughout North America and specializes in services that include the design and construction of bridges, roadways, marine, dredging, ship terminals, and piers, and specialty structures and facilities.

Total assets by segment are not presented as our CODM, as defined by ASC 280, does not review or allocate resources based on segment assets. We do not have material intersegment revenue or gross profit. Joint ventures are classified into the segment with which the projects align.

Segment Revenue

Revenue by segment for the three and six months ended June 30, 2024 and 2023, was as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

Six Months Ended

​

(Amounts in thousands)

​

June 30, 2024

June 30, 2023

​

June 30, 2024

June 30, 2023

​

​

​

​

% of Total

​

​

​

​

% of Total

​

​

​

​

% of Total

​

​

% of Total

Segment

​

Revenue

Revenue

Revenue

Revenue

​

​

Revenue

​

Revenue

​

Revenue

​

Revenue

Civil

​

$

79,368

31.6

%

$

65,567

25.5

%

​

$

163,641

30.3

%

$

138,556

26.1

%

Transportation

​

172,144

68.4

%

191,360

74.5

%

​

375,968

69.7

%

393,200

73.9

%

Total revenue

​

$

251,512

100.0

%

$

256,927

100.0

%

​

$

539,609

100.0

%

$

531,756

100.0

%

​

Segment Gross Profit (Loss)

Gross profit (loss) by segment for the three and six months ended June 30, 2024 and 2023, was as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

(Amounts in thousands)

​

June 30, 2024

June 30, 2023

​

June 30, 2024

June 30, 2023

​

​

​

% of Segment

​

% of Segment

​

​

% of Segment

​

​

% of Segment

Segment

​

Gross Profit

​

Revenue

​

Gross Profit

​

Revenue

​

Gross Profit

​

Revenue

​

Gross Profit

​

Revenue

Civil

​

$

9,160

11.5

%

$

5,906

9.0

%

​

$

27,030

16.5

%

$

14,672

10.6

%

Transportation

​

(49,182)

(28.6)

%

(39,700)

(20.7)

%

​

(46,631)

(12.4)

%

(29,523)

(7.5)

%

Gross loss

​

$

(40,022)

(15.9)

%

$

(33,794)

(13.2)

%

​

$

(19,601)

(3.6)

%

$

(14,851)

(2.8)

%

​

Revenue earned outside of the United States was 19% and 22% for the three months ended June 30, 2024 and 2023, respectively. Revenue earned outside of the United States was 23% and 22% for the six months ended June 30, 2024 and 2023, respectively

​

6. Debt

Long-term debt and credit facilities consisted of the following as of June 30, 2024, and December 31, 2023:

​

​	​	​	​	​	​
​	As of
(Amounts in thousands)	June 30, 2024		December 31, 2023
Secured notes	$	217,578	​	$	210,197
Mortgage notes		644	​		689
Revolving credit facility		90,000	​		90,000
Total debt		308,222	​		300,886
Unamortized deferred financing costs		(449)	​		(526)
Total debt, net		307,773	​		300,360
Less: Current portion		(134,534)	​		(48,454)
Total long-term debt	$	173,239	​		251,906

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The weighted average interest rate on total debt outstanding as of June 30, 2024 and December 31, 2023, was 7.01% and 6.12%, respectively.