# Southland Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Southland Holdings, Inc.](/companies/slnd.md) (CIK 1883814)
- Form: 10-Q
- Filed: 2024-05-13
- Accepted by EDGAR: May 13, 2024, 21:00 ET
- Period: 2024-03-31
- Accession: 0001558370-24-007986
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1883814/000155837024007986/slnd-20240331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1883814/000155837024007986/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $288.1m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $267.7m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $20.4m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $14.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $6.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $5.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $307.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$406.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 47,925,072 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$9.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $3.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-03-31 | $31.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $967.1m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $1.23bn | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $606.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $966.4m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $255.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-31 | $46.4m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-31 | $249.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 29,959 characters.

The following discussion and analysis contain forward-looking statements relating to future events or our future financial performance, which involve risk and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. Please see the discussion regarding forward-looking statements included under the “Cautionary Note Regarding Forward-Looking Statements” section for a discussion of some of the uncertainties, risks, and assumptions associated with these statements.

The following discussion and analysis present information that we believe is relevant to an assessment and understanding of our condensed consolidated balance sheets, statements of cash flows, and results of operations. This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto.

### Overview

Southland is a diverse leader in specialty infrastructure construction with roots dating back to 1900. The end markets for which we provide services cover a broad spectrum of specialty services within infrastructure construction. We design and construct projects in the bridges, tunnels, communications, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipelines end markets.

Southland is based in Grapevine, Texas. We are the parent company of Johnson Bros. Corporation, American Bridge Company, Oscar Renda Contracting, Southland Contracting, Mole Constructors, and Heritage Materials. With the combined capabilities of these six subsidiaries, Southland has become a diversified industry leader with projects spanning North America in various end markets.

### Key Factors Affecting Results of Operations

#### Business Environment

Our Civil segment operates throughout North America and specializes in services 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 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. Our Transportation segment is responsible for the construction of bridges and structures including many of the most recognizable bridges, convention centers, sports stadiums, marine facilities, and ferris wheels in the world.

Both our Civil and Transportation segments continue to identify new opportunities to grow our business, and the future outlook of the end markets we serve remains positive. Although risk and uncertainty exist, including, but not limited to, the items addressed within our forward-looking statements and risk factors, we believe that we are well positioned to compete on new infrastructure projects in both the public and private sectors. We believe that we have the operational excellence, reputation, and technical skill to continue to grow our business.

#### Market Trends and Uncertainties

In both our Transportation and Civil segments, we have competitors within the individual markets and geographic areas in which we operate, ranging from small, local companies to larger regional, national, and international companies. Although the construction business is highly competitive, there are few, if any, companies which compete in all of our 33 market areas, both geographically and from an end market perspective. The degree and type of competition is influenced by the type and scope of construction projects within individual markets. Equipment ownership and ability to self-perform across numerous disciplines are two of our significant competitive advantages. We believe that the primary factors influencing competition in our industry are price, reputation for quality, safety, schedule certainty, relevant experience, availability of field supervision and skilled labor, machinery and equipment, financial strength, as well as knowledge of local markets and conditions. We believe that we can compete favorably in all of these factors.

Many of our competitors have the ability to perform work in either the private or public sectors. When opportunities for work in one sector are reduced, competitors tend to look for opportunities in the other sector. This migration has the potential to reduce revenue growth and/or increase pressure on gross profit margins.

We have seen an increase in demand for specialty construction projects in recent years at the federal, state, and local level. We anticipate the further spending on infrastructure related to economic stimulus spending including the Infrastructure Investment and Jobs Act that was passed in 2021, and other federal, state, or local initiatives.

We believe that the combination of our experience, reputation, and technical expertise places us at the top among companies of our size. This combination of skills has allowed us to pursue complex projects with fewer competitors.

#### Seasonality, Cyclicality, and Variability

The results of our operations are subject to quarterly variations. Much of the variation is the result of weather, particularly rain, ice, snow, heat, wind, and named storms, which can impact our ability to perform construction activities. These weather impacts can affect revenue and profitability in either of our business segments. Any quarter can be affected either negatively or positively by atypical weather patterns in any part of North America, or other areas in which we operate. Traditionally, our first quarter is the most weather-affected; however, this may or may not necessarily be true in future periods.

Our business may also be affected by overall economic market conditions, including but not limited to declines in spending by project owners, delays in new projects, by changes in client schedules, or for other reasons.

### Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses earned and incurred, respectively, during the reporting period. Critical accounting estimates are fundamental to the portrayal of both our financial condition and results of operations and often require difficult, subjective, and complex estimates and judgments. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from the continuing changes in the economic environment will be reflected in the financial statements in future periods. With respect to our critical accounting policies and estimates, there have been no material developments or changes from the policies and estimates discussed in our annual disclosures.

More information about our accounting policies can be found in Note 2 of our audited financial statements, and Management’s Discussion and Analysis, for the year ended December 31, 2023 on our Annual Report on Form 10-K, as originally filed with the SEC on March 4, 2024.

### Materials and Paving

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. In an effort to wind down this component of its Transportation segment and reallocate resources towards core operations, the Company sold various materials production assets. The Company has concluded this action with M&P does not qualify for Discontinued Operations treatment and presentation under ASC 205-20 as it does not represent a strategic shift in the Company’s business. For the three months ended March 31, 2024, M&P contributed $38.6 million to revenue and $10.4 million in gross loss. This compares to $58.1 million to revenue and $10.6 million to gross loss for the three months ended March 31, 2023. As of March 31, 2024, approximately 7.7% of Southland’s backlog was in M&P, and Southland estimates this work to be substantially completed in the next 15 months.

### Results of Operations

The following table sets forth summary financial information for the three months ended March 31, 2024 and 2023:

*(Amounts in thousands)*

| ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended March 31, 2024 | ​ | ​ ​ March 31, 2023 |
| --- | --- | ---: | --- | ---: |
| Revenue | ​ | $288,097 | ​ | $274,829 |
| Cost of construction | ​ | 267,676 | ​ | 255,886 |
| **Gross profit** | **​** | 20,421 | ​ | 18,943 |
| Selling, general, and administrative expenses | ​ | 14,394 | ​ | 15,571 |
| **Operating income** | **​** | 6,027 | ​ | 3,372 |
| Loss on investments, net | ​ | (76) | ​ | (32) |
| Other income (loss), net | ​ | 536 | ​ | (2,599) |
| Interest expense | ​ | (5,655) | ​ | (3,254) |
| **Earnings (losses) before income taxes** | **​** | 832 | ​ | (2,513) |
| Income tax expense | ​ | 307 | ​ | 1,753 |
| **Net income (loss)** | **​** | 525 | ​ | (4,266) |
| Net income attributable to noncontrolling interests | ​ | 931 | ​ | 398 |
| **Net loss attributable to Southland Stockholders** | **​** | $(406) | ​ | $(4,664) |

#### Revenue

Revenue for the three months ended March 31, 2024, was $288.1 million, an increase of $13.3 million, or 4.8%, compared to the three months ended March 31, 2023. The increase was primarily attributable to an $11.3 million increase of revenue in our Civil segment and a $2.0 million increase in revenue in our Transportation segment.

#### Cost of construction

Cost of construction for the three months ended March 31, 2024, was $267.7 million, an increase of $11.8 million, or 4.6%, compared to the three months ended March 31, 2023. The increase was primarily attributable to a $2.2 million increase in our Civil segment and a $9.6 million increase in our Transportation segment.

#### Gross profit

Gross profit for the three months ended March 31, 2024, was $20.4 million, an increase of $1.5 million, or 7.8%, compared to the three months ended March 31, 2023. The increase was primarily attributable to a $9.1 million increase in our Civil segment offset by a $7.6 million decrease in our Transportation segment.

#### Selling, general, and administrative expenses

Selling, general, and administrative expenses for the three months ended March 31, 2024, were $14.4 million, a decrease of $1.2 million, or 7.6%, compared to the three months ended March 31, 2023. The decrease was due to a reduction of public company costs and incentive compensation expense in 2024 compared to the same period in 2023.

#### Interest expense

Interest expense for the three months ended March 31, 2024, was $5.7 million, an increase of $2.4 million, or 73.8%, compared to the three months ended March 31, 2023. The difference is primarily driven by an increase in external borrowings compared to the prior year and higher interest rates on the additional borrowings. We also experienced increased borrowing costs on our revolving credit facility compared to the same period in 2023.

#### Income tax expense

Income tax expense for the three months ended March 31, 2024, was $0.3 million, or an effective rate of 36.9%. The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, federal tax credits, the income earned in foreign jurisdictions with a zero tax rate; however that foreign income is included within U.S. taxable income through GILTI, and finally the impact of worldwide forecast on the interim calculation under ASC 740.

Income tax expense for the three months ended March 31, 2023, was $1.8 million, or an effective rate of negative 69.8%. The difference from the federal statutory tax rate of 21% was driven by the pre-tax loss, change in the U.S. consolidated filing structure as a result of the Merger, and elections made by various subsidiaries to voluntarily revoke their S-corporation status effective January 1, 2023.

### Segment Results

The following table sets forth segment information for the three months ended March 31, 2024 and 2023:

*(Amounts in thousands)*

| ​ ​ ​ Segment | ​ ​ ​ ​ ​ | ​ ​ Three Months Ended March 31, 2024 ​ ​ Revenue | ​ ​ ​ % of Total ​ Revenue ​ | ​ ​ March 31, 2023 ​ ​ Revenue | ​ ​ ​ % of Total ​ Revenue |
| --- | --- | ---: | ---: | ---: | ---: |
| Civil | ​ | $84,273 | 29.3% | $72,989 | 26.6% |
| Transportation | ​ | 203,824 | 70.7% | 201,840 | 73.4% |
| Total revenue | ​ | $288,097 | 100.0% | $274,829 | 100.0% |

*(Amounts in thousands)*

| ​ ​ ​ Segment | ​ ​ ​ ​ ​ | ​ ​ Three Months Ended March 31, 2024 ​ ​ Gross Profit | ​ ​ ​ ​ % of Segment Revenue ​ | ​ ​ March 31, 2023 ​ ​ Gross Profit | ​ ​ ​ % of Segment Revenue ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Civil | ​ | $17,870 | 21.2% | $8,766 | 12.0% |
| Transportation | ​ | 2,551 | 1.3% | 10,177 | 5.0% |
| Gross profit | ​ | $20,421 | 7.1% | $18,943 | 6.9% |

#### Civil

Revenue for the three months ended March 31, 2024, was $84.3 million, an increase of $11.3 million, or 15.5%, compared to the three months ended March 31, 2023. This was primarily attributable to increased revenues of $7.5 million from a project in Colorado and $7.1 million from a water pipeline project in the Southwest, for the three months ended March 31, 2024 versus the same period in 2023.

Gross profit for the three months ended March 31, 2024, was $17.9 million, or 21.2% of segment revenue, compared to $8.8 million, or 12.0% of segment revenue, for the three months ended March 31, 2023. The primary drivers to the increase of $9.1 million were increased profit contribution of $2.4 million for a project in Colorado, $2.2 million from a water project on the east coast and $3.8 million from two water projects in the Southwest for the three months ended March 31, 2024 versus the same period in 2023.

#### Transportation

Revenue for the three months ended March 31, 2024, was $203.8 million, an increase of $2.0 million, or 1.0%, compared to the three months ended March 31, 2023. The increase was primarily attributable to increased revenues of $15.0 million and $7.6 million from a project in the Bahamas and a bridge project on the east coast, respectively, in the three months ended March 31, 2024 versus the same period in 2023. These increases were offset by decreased revenue from the M&P line of $19.5 million in the three months ended March 31, 2024 versus the same period in 2023.

Gross profit for the three months ended March 31, 2024, was $2.6 million, or 1.3% of segment revenue, compared to gross profit of $10.2 million, or 5.0% of segment revenue, for the three months ended March 31, 2023. The primary contributions to the decrease of $7.6 million was a decrease in profitability of $7.2 million from a bridge project in the Midwest, for the three months ended March 31, 2024 versus the same period in 2023.

### Key Business Metrics

#### Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operational performance. We use the following non-GAAP measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that the non-GAAP financial information may be helpful in assessing our operating performance and facilitates an alternative comparison among fiscal periods. The non-GAAP financial measures are not, and should not be viewed as, a substitute for GAAP reporting measures.

#### EBITDA and Adjusted EBITDA

In our industry, it is customary to manage our business using earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”). EBITDA assists management and the board of directors and may be useful to investors in comparing our operating performance consistently over time as it removes the impact of our capital structure and expenses that do not relate to our core operations.

Additionally, it is also customary to manage our business using adjusted EBITDA, which may include adjustments such as, but is not limited to, certain non-cash charges, stock-based compensation, and other one-time income or expenses (“Adjusted EBITDA”). Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. We believe that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that, when evaluating Adjusted EBITDA, we may have future activities similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA on a supplemental basis. The reconciliation of net loss to Adjusted EBITDA below should be reviewed, and no single financial measure should be relied upon to evaluate our business. Below is a reconciliation of net loss to Adjusted EBITDA.

*(Amounts in thousands)*

| ​ ​ | ​ ​ Three Months Ended March 31, 2024 | ​ ​ | ​ ​ March 31, 2023 |
| --- | ---: | --- | ---: |
| Net loss attributable to Southland Stockholders | $(406) | ​ | $(4,664) |
| Depreciation and amortization | 5,577 | ​ | 8,560 |
| Income tax expense | 307 | ​ | 1,753 |
| Interest expense | 5,655 | ​ | 3,254 |
| Interest income | (184) | ​ | (137) |
| EBITDA | ​ 10,949 | ​ | ​ 8,766 |
| Transaction related costs | ​ — | ​ | ​ 1,035 |
| Contingent earnout consideration non-cash expense reversal | ​ — | ​ | ​ 2,936 |
| Adjusted EBITDA | $10,949 | ​ | $12,737 |

#### Backlog

We define contract backlog (“Backlog”) as a measure of the total amount of revenue remaining to be earned on projects that have been awarded. Backlog consists of two components: (1) unearned revenue and (2) contracts awarded but not started. Unearned revenue includes the revenue we expect to record in the future on in-progress contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts. Contracts that are awarded, but not yet started, are included in Backlog once a contract has been fully executed and/or we have received a formal “Notice to Proceed” from the project owner.

*(Amounts in thousands)*

| ​ | ​ ​ ​ |
| --- | ---: |
| **Balance December 31, 2023** | $2,834,966 |
| New contracts, change orders, and adjustments | 100,893 |
| Less: contract revenue recognized in 2024 | (296,947) |
| **Balance March 31, 2024** | $2,638,912 |

Backlog should not be considered a comprehensive indicator of future revenue as any of our contracts can be terminated by our customers on relatively short notice, and Backlog does not include future work for which we may be awarded or new awards for which we are awaiting an executed contract or an authorized “Notice to Proceed.” In the event of a cancelation, we are typically reimbursed for all of our costs through a specific contractual date, as well as our costs to demobilize from the project site. Costs may include preconstruction and engineering services as well as that of our subcontractors. Our contracts do not typically grant us rights to revenue reflected in Backlog. Projects may remain in the Backlog for extended periods of time as a result of schedule delays, regulatory requirements, project specific issues, or other reasons. Contract amounts from contracts where a transaction price cannot be reasonably estimated are not included within our Backlog amount.

Below is our Backlog by segment.

#### Civil

*(Amounts in thousands)*

| ​ | ​ ​ ​ |
| --- | ---: |
| **Balance December 31, 2023** | $634,458 |
| New contracts, change orders, and adjustments | 74,142 |
| Less: contract revenue recognized in 2024 | (90,094) |
| **Balance March 31, 2024** | $618,506 |

#### Transportation

*(Amounts in thousands)*

| ​ | ​ ​ ​ |
| --- | ---: |
| **Balance December 31, 2023** | $2,200,508 |
| New contracts, change orders, and adjustments | 26,751 |
| Less: contract revenue recognized in 2024 | (206,853) |
| **Balance March 31, 2024** | $2,020,406 |

### Liquidity, Capital Commitments and Resources

Our principal sources of liquidity are cash generated from operations, funds from borrowings, and existing cash on hand. Our principal uses of cash typically include the funding of working capital obligations, debt service, and investment in machinery and equipment for our projects.

We will receive cash proceeds from the exercise of any Warrants. We believe the likelihood that Warrant holders will exercise their Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock. On May 9, 2024, the closing price of our common stock was $4.69 per share. To the extent the market price of our common stock remains below the exercise price of $11.50 per share, we believe that Warrant holders will be unlikely to exercise their Warrants for cash, resulting in little or no cash proceeds to us for any such exercise. To the extent we receive any cash proceeds, we expect to use such proceeds for general corporate and working capital purposes, which would increase our liquidity. However, we do not expect to rely materially on the cash exercise of Warrants to fund our operations.

Based on historical results, losses and other negative impacts related to M&P and other certain projects, and delays in settling claims and change orders, our liquidity position has been negatively impacted. However, we believe anticipated future operating results, available cash, and other financing sources and initiatives will be adequate to meet our liquidity needs for at least the next twelve months, including any anticipated requirements for working capital, capital expenditures, and scheduled debt service.

Our current and future liquidity is greatly dependent upon our operating results, which are largely determined by overall economic conditions and our current contracts and Backlog. Our liquidity could be adversely affected by a disruption in the availability of credit. If such a material adverse event were to occur, we may be unable to borrow under our revolving credit facility agreement or may be required to seek additional financing. In addition, we may be required to seek additional financing to refinance all or a significant portion of our existing debt on or prior to maturity. We may also seek to access the public or private equity markets to support our liquidity whenever required or conditions are favorable to us. We have filed a shelf registration statement on Form S-3 with the SEC that was declared effective by the SEC on April 8, 2024 (File No. 333-278008), which allows us to offer and sell up to an aggregate amount of $150.0 million of any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or units of these securities from time to time. There can be no assurance that we will be able to raise additional capital or obtain additional financing when needed or on terms that are favorable to us.

We are exposed to market risks relating to fluctuations in interest rates and currency exchange risks. Significant changes in market conditions could cause interest rates to increase and have a material impact on the financing needed to operate our business.

The following table sets forth summary change in cash, cash equivalent and restricted cash for the three months ended March 31, 2024 and 2023:

*(Amounts in thousands)*

| ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended March 31, 2024 | ​ | ​ ​ March 31, 2023 |
| --- | --- | ---: | --- | ---: |
| Net cash used in operating activities | ​ | $(9,897) | ​ | $(34,779) |
| Net cash (used in) provided by investing activities | ​ | (432) | ​ | 48 |
| Net cash (used in) provided by financing activities | ​ | (6,943) | ​ | 6,101 |
| Effect of exchange rate changes | ​ | (31) | ​ | 190 |
| Net change in cash, cash equivalents, and restricted cash | ​ | $(17,303) | ​ | $(28,440) |

Net cash used in operating activities was $9.9 million during the three months ended March 31, 2024, compared to $34.8 million for the three months ended March 31, 2023. During the three months ended March 31, 2024, the primary drivers in cash used in operating activities were increases in accounts receivables and contract assets of $32.1 million and $16.2 million, respectively, offset by increases in accounts payable of $40.0 million. During the three months ended March 31, 2023, the primary drivers in cash used in operating activities were increases in accounts receivables and contract assets of $49.3 million and $30.3 million, respectively, offset by increases in accounts payable of $33.7 million and contract liabilities of $7.2 million.

Net cash used in investing activities was $0.4 million during the three months ended March 31, 2024, compared to $0.0 million provided by investing activities for the three months ended March 31, 2023. During the three months ended March 31, 2024, the primary drivers in cash used in investing activities were an increase in purchase of property and equipment of $3.1 million, offset by the increase in proceeds from sale of property and equipment of $2.7 million. During the three months ended March 31, 2023, the primary drivers in cash provided by investing activities were an increase in purchase of property and equipment of $1.2 million, offset by the increase in proceeds from sale of property and equipment of $1.3 million.

Net cash used in financing activities was $6.9 million for the three months ended March 31, 2024, compared to $6.1 million provided by financing activities for the three months ended March 31, 2023. During the three months ended March 31, 2024, the primary drivers in cash provided by financing activities were payments on notes payable and finance leases of $10.7 and $1.4 million, respectively, offset by borrowings on the revolving credit facility of $5.0 million. During the three months ended March 31, 2023, the primary drivers in cash provided by financing activities were payments on notes payable and finance leases of $12.4 million and $1.2 million, respectively, offset by $3.0 million in borrowings on the revolving credit facility and $17.1 million in proceeds from the Merger.

As of March 31, 2024, we had long-term debt of $302.0 million, of which $46.4 million is due within the next twelve months. In February 2024 and May 2024, the Company amended the revolving credit facility to restructure certain covenant levels. We are currently in compliance with all applicable debt covenants, as amended or waived.

#### Revolving Credit Facility

In July 2021, we entered into a revolving credit facility agreement with Frost Bank for $50.0 million. As of December 31, 2022, the revolving credit facility agreement had been amended and increased to $100.0 million. In August 2023, the revolving credit facility was extended through January 15, 2025 and we incurred $0.3 million as deferred financing cost. The revolving credit facility agreement bears interest on drawn balances at 1-month SOFR, subject to a floor of 0.90%, plus an applicable margin rate of 2.10%. The waiver granted for March 31, 2024 covenant non-compliance amended the revolving credit facility limit to $95.0 million, required a $5.0 million cash collateral deposit to be made by June 15, 2024, and extended maturity to April 15, 2025. As of March 31, 2024, $95.0 million was drawn on the revolving credit facility.

#### Secured Notes

We enter into secured notes in order to finance growth within our business. In July 2023, we refinanced approximately $76.4 million of existing secured notes in exchange for a new equipment note in the amount of $113.5 million. The new equipment note is secured by specific construction equipment assets and has a five-year fully amortizing term at a fixed rate of 7.25%. We incurred $0.3 million as deferred financing cost and $0.6 million as bank service charges in connection with the refinancing. The deferred financing costs are included in long-term debt on our consolidated balance sheets. Additionally, as part of the refinancing, we incurred a loss on extinguishment of debt of $0.6 million, which was included in other income, net on our consolidated statements of operations. As of March 31, 2024, we had outstanding secured notes scheduled to expire between April 2024 and March 2033. Interest rates on the secured notes range between 1.29% and 8.00%.

#### Mortgage Notes

We also enter into mortgage notes in order to finance growth within our business. As of March 31, 2024, we had outstanding mortgage notes scheduled to expire between October 2024 and February 2029. Interest rates on the mortgage notes range between 3.84% and 5.99%.

## Controls and procedures

As filed, 2,245 characters.

#### Evaluation of Disclosure Controls and Procedures

It is management’s responsibility to establish and maintain adequate disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the company’s principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and our Chief Financial Officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report. Following this review and evaluation, our management determined that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

#### Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2024 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 282 characters.

Other than as set forth below, there have been no additional risk factors identified and no material changes with regard to the risk factors previously disclosed under “Item 1A. Risk Factors” to Part I of our Annual Report on Form 10-K as of the fiscal year ended December 31, 2023.

Filed May 13, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-007986. Last ingested by Listed: Oct 24, 2026, 15:16 ET. No prices; not investment advice.