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What changed in Southland Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Southland Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+171 added−191 removedSource: 10-K (2024-03-04) vs 10-K (2023-03-21)

Top changes in Southland Holdings, Inc.'s 2023 10-K

171 paragraphs added · 191 removed · 107 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeDue to the “COVID-19” pandemic and Russia’s invasion of Ukraine, the construction industry has experienced widespread supply chain impacts. Labor costs continue to increase due to shortages of qualified workers.
Biggest changeFor the years ended December 31, 2023, December 31, 2022, and December 31, 2021, our industry has faced material impacts to profitability due to increased costs. We may incur increased project costs due to increased prices in the future. Due to the novel coronavirus (“COVID-19”) pandemic and Russia’s invasion of Ukraine, the construction industry has experienced widespread supply chain impacts.
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.
Much of the variation is the result of weather, particularly heat, wind, snow, ice, rain 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.
In addition, the Environmental Protection Agency (the “EPA”) and other federal, state, local, and international agencies regulate our operations including in regards to the handling, transportation and disposal of non-hazardous and hazardous substances and waste, as well as emission and discharges into the environment; including discharges to air, surface water, groundwater, soil, and others.
In addition, the Environmental Protection Agency (the “EPA”) and other federal, state, local, and international agencies regulate our operations in regards to the handling, transportation and disposal of non-hazardous and hazardous substances and waste, as well as emission and discharges into the environment; including discharges to air, surface water, groundwater, soil, and others.
Government contracts contain specific procurement regulations, contract provisions, and a variety of other requirements related to the formation, administration, project performance, and accounting. These agreements require certification of compliance. Our operations are subject to various statutes and executive orders.
Government contracts contain specific procurement regulations, contract provisions, and a variety of other requirements related to formation, administration, project performance, and accounting. These agreements require certification of compliance. Our operations are subject to various statutes and executive orders.
We devote resources to the development, maintenance, communication and enforcement of our Code of Conduct, our anti-bribery compliance policies, our internal control processes and compliance related policies. We strive to conduct timely internal investigations of potential violations and take appropriate action depending upon the outcome of the investigation.
We devote resources to the development, maintenance, communication and enforcement of our Code of Business Conduct, our anti-bribery compliance policies, our internal control processes and compliance related policies. We strive to conduct timely internal investigations of potential violations and take appropriate action depending upon the outcome of the investigation.
These include but are not limited to: ● the Davis-Bacon Act which regulates wages and benefits, 9 Table of Contents ● Executive Order 11246 which establishes equal employment opportunity and affirmative action requirements, ● the Walsh-Healy Act which prescribes a minimum wage and regulates overtime and other working conditions, ● Executive Order 14063 which requires project labor agreements on all federal construction projects with contract values over $35 million, ● the Drug-Free Workplace Act, and ● the Federal Acquisition Regulation and the Federal Civil False Claims Act.
These include but are not limited to: ● the Davis-Bacon Act which regulates wages and benefits, 7 Table of Contents ● Executive Order 11246 which establishes equal employment opportunity and affirmative action requirements, ● the Walsh-Healy Act which prescribes a minimum wage and regulates overtime and other working conditions, ● Executive Order 14063 which requires project labor agreements on all federal construction projects with contract values over $35 million, ● the Drug-Free Workplace Act, and ● the Federal Acquisition Regulation and the Federal Civil False Claims Act.
While we may subcontract specialized activities such as blasting, hazardous waste removal and selected electrical/instrumentation work, we self-perform most of the work on our projects with our own resources, including field supervision, labor, and equipment. 7 Table of Contents Contract Backlog Contract backlog (“Backlog”) in our industry is an economic measure of the total value of work remaining to be performed on projects that we have been awarded.
While we may subcontract specialized activities such as blasting, hazardous waste removal and selected electrical/instrumentation work, we self-perform most of the work on our projects with our own resources, including field supervision, labor, and equipment. 5 Table of Contents Contract Backlog Contract backlog (“Backlog”) in our industry is an economic measure of the total value of work remaining to be performed on projects that we have been awarded.
Our contracts typically contain protections in the case of excessive increases in the cost of either labor or equipment. In our fixed price contracts, we bid with assumptions of increases in wages and prices of raw materials. Frequently, we obtain fixed price quotes from major subcontractors and material suppliers early in our project schedules.
Our contracts may contain protections in the case of excessive increases in the cost of either labor or equipment. In our fixed price contracts, we bid with assumptions of increases in wages and prices of raw materials. Frequently, we obtain fixed price quotes from major subcontractors and material suppliers early in our project schedules.
We target a mix of large-scale and small-scale projects in our bidding which mitigates risk as it relates to specific customers or projects. Seasonality, Cyclicality, and Variability The results of our operations are subject to quarterly variations.
We target a mix of large-scale and small-scale projects in our bidding which mitigates risk as it relates to specific customers or projects. Seasonal, Cyclicality, and Variability The results of our operations are subject to quarterly variations.
The majority of both our public and private customers are located in the United States; however, we have large projects in Canada and the Bahamas and experience in worldwide markets. 5 Table of Contents The management within each of our business segments is responsible for cultivating and maintaining successful long-term relationships with customers.
The majority of both our public and private customers are located in the United States; however, we have large projects in Canada and the Bahamas, and experience in worldwide markets. Management within each of our business segments is responsible for cultivating and maintaining successful long-term relationships with customers.
Contracts that are awarded, but not yet started, are included in Backlog once a contract has been fully executed and/or we have received formal Notice to Proceed from the project owner. Although contract backlog reflects business that we consider to be firm; deferrals, cancellations, or scope adjustments may occur.
Contracts that are awarded, but not yet started, are included in Backlog once a contract has been fully executed and/or we have received formal “Notice to Proceed” from the project owner. Although contract backlog reflects business that we consider to be firm, deferrals, cancellations, or scope adjustments may occur.
While relationships are important, we realize that future opportunities also require cost effective bids, as pricing is a key element for most construction projects. Strategy Southland exists to build great things that shape our landscape and foster reliable infrastructure for future generations.
While relationships are important, we realize that future opportunities also require cost effective bids, as pricing is a key element for most construction projects. 3 Table of Contents Strategy Southland exists to build great things that shape our landscape and foster reliable infrastructure for future generations.
Any quarter can be affected 6 Table of Contents 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 will not necessarily be true in future periods.
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 not necessarily be true in future periods.
Hiring and retaining our skilled workers continues to be a priority to avoid future potential labor shortages. 8 Table of Contents Risk Management, Insurance, and Bonding We are insured to cover a broad range of exposures arising from our work in the construction industry.
Labor costs continue to increase due to shortages of qualified workers. Hiring and retaining our skilled workers continues to be a priority to avoid future potential labor shortages. 6 Table of Contents Risk Management, Insurance, and Bonding We are insured to cover a broad range of exposures arising from our work in the construction industry.
All of our policies have been procured with limits and deductibles or self-insured retention amounts of varying amounts per occurrence. We believe that our insurance coverage meets or exceeds our needs relating to any casualty or other type of insurance loss.
All of our policies have been procured with limits and deductibles or self-insured retention amounts of varying amounts per occurrence. We believe that our insurance coverage meets or exceeds our needs relating to any casualty or other type of insurance loss. Our safety team has created an atmosphere of safety at our projects.
Fixed price contracts, particularly with federal, state, and local government customers, are expected to continue to represent a majority of our total Backlog. ​ ​ ​ ​ (Amounts in thousands) Backlog Balance: December 31, 2020 ​ $ 2,897,381 New contracts, change orders, and adjustments ​ 592,393 Gross backlog ​ 3,489,774 Less: contract revenue recognized in 2021 ​ (1,271,201) Balance: December 31, 2021 ​ $ 2,218,573 New contracts, change orders, and adjustments ​ 1,892,946 Gross backlog ​ 4,111,519 Less: contract revenue recognized in 2022 ​ (1,137,634) Balance December 31, 2022 ​ $ 2,973,885 ​ Construction Costs and Raw Materials We manage our business to minimize or eliminate exposure to labor and material price increases, including through inflation, in our bids for projects, when possible.
Fixed price contracts, particularly with federal, state, and local government customers, are expected to continue to represent a majority of our total Backlog. ​ ​ ​ ​ (Amounts in thousands) ​ Balance December 31, 2021 ​ $ 2,218,573 New contracts, change orders, and adjustments ​ 1,892,946 Gross Backlog ​ 4,111,519 Less: contract revenue recognized in 2022 ​ (1,137,634) Balance December 31, 2022 ​ $ 2,973,885 New contracts, change orders, and adjustments ​ 1,011,797 Gross Backlog ​ 3,985,682 Less: contract revenue recognized in 2023 ​ (1,150,716) Balance December 31, 2023 ​ $ 2,834,966 ​ Construction Costs and Raw Materials We manage our business to minimize or eliminate exposure to labor and material price increases, including through inflation, in our bids for projects, when possible.
Diversity and Inclusion We employ a dynamic mix of people to create the strongest company possible. Our policy strictly forbids discrimination in employment on the basis of age, culture, gender, national origin, sexual orientation, physical appearance, race, or religion. We are an inclusive, diverse company with people of all backgrounds, experience, culture, styles, talents, and other protected classes.
Our policy strictly forbids discrimination in employment on the basis of age, culture, gender, national origin, sexual orientation, physical appearance, race, or religion. We are an inclusive, diverse company with people of all backgrounds, experience, culture, styles, talents, and other protected classes.
We believe that we have all of the necessary licenses required to conduct our operations and that we are in substantial compliance with applicable regulatory requirements. Below is a summary of some of the significant regulations that impact our business.
Government Regulations Our business is subject to environmental, health and safety, government procurement, anti-bribery, and other government regulations and requirements. We believe that we have all of the necessary licenses required to conduct our operations and that we are in substantial compliance with applicable regulatory requirements. Below is a summary of some of the significant regulations that impact our business.
We are often invited to bid on projects with customers who maintain pre-qualified contractor lists. Contractors are selected for the pre-approved contractor lists by virtue of their prior performance for such customers, as well as their reputation, technical expertise, safety record, ability to obtain surety bonds, and experience.
Contractors are selected for the pre-approved contractor lists by virtue of their prior performance for such customers, as well as their reputation, technical expertise, safety record, ability to obtain surety bonds, and experience.
Our fixed price contract bids also tend to contain contingencies for inflation or other significant increases. The construction and other materials needed to complete our projects tends to be available locally from multiple suppliers which insulates us from being overly reliant on any particular vendor.
Our fixed price contract bids also tend to contain contingencies for inflation or other significant increases. The construction supplies and other materials needed to complete our projects are often available from multiple suppliers which insulates us from being overly reliant on any particular vendor, however this is not always the case.
In addition, the “SEC” requires strict compliance with certain accounting and internal control standards set forth under the FCPA. Failure to comply with the FCPA and other laws can expose us and/or individual employees to potentially severe criminal and civil penalties. Such penalties may have a material adverse effect on our business, results of operations and financial condition.
Failure to comply with the FCPA and other laws can expose us and/or individual employees to potentially severe criminal and civil penalties. Such penalties may have a material adverse effect on our business, results of operations and financial condition.
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 based on these factors.
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.
In our high-performance culture, everyone is treated fairly and respectfully and has equal access to opportunities based on capabilities and performance, regardless of gender, generation, sexual orientation, mental and physical ability, race, ethnicity, and other protected classes.
In our high-performance culture, everyone is treated fairly and respectfully and has equal access to opportunities based on capabilities and performance, regardless of gender, generation, sexual orientation, mental and physical ability, race, ethnicity, and other protected classes. Our workforce was made up of approximately 2,500 employees as of December 31, 2023, of which 600 were salaried and 1,900 were hourly.
These laws and regulations affect how we transact business and, in some instances, impose additional costs on our business operations, which may adversely affect our business, results of operations and financial condition. As further described in “Item 1A. Risk Factors,” violation of specific laws and regulations could lead to fines, contract termination, debarment of contractors and/or suspension of future contracts.
These laws and regulations affect how we transact business and, in some instances, impose additional costs on our business operations, which may adversely affect our business, results of operations and financial condition. As further described in “ Item 1A.
Competition and Market Trends 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.
Our business may also be affected by overall economic market declines, delays in new projects, changes in client schedules, or for other reasons. 4 Table of Contents Competition and Market Trends 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.
Code of Conduct All of our employees are subject to our Code of Conduct, which includes guidance and requirements concerning, among other things, general business ethics, including policies concerning the environment, conflicts of interest, anti-corruption, harassment and discrimination, data security and privacy, and the Anti-Bribery and Corruption Policy, which includes guidance and requirements concerning, among other things, interactions with government officials; provisions of gifts, entertainment and hospitality, and charitable and political contributions. ​
Code of Business Conduct All of our employees are subject to our Code of Business Conduct, which includes guidance and requirements concerning, among other things, general business ethics, including policies concerning the environment, conflicts of interest, anti-corruption, harassment and discrimination, data security and privacy, and the Anti-Bribery and Corruption Policy, which includes guidance and requirements concerning, among other things, interactions with government officials; provisions of gifts, entertainment and hospitality, and charitable and political contributions. ​ Company History and Available Information ​ The Company was incorporated in on July 14, 2021 as a Delaware corporation for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities.
In our industry, we are generally required to possess various types of surety bonds guaranteeing our completion of projects for most public and private customer contracts. Surety bond costs and our ability to obtain surety bonds are largely contingent on our working capital, Backlog, past performance and reputation, capitalization, management and technical expertise, and other factors at the underwriter’s discretion.
Surety bond costs and our ability to obtain surety bonds are largely contingent on our working capital, Backlog, past performance and reputation, capitalization, management and technical expertise, and other factors at the underwriter’s discretion. To date, we have been able to acquire the level of surety bonds necessary to support our business.
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 believe that we can compete favorably based on 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.
We believe that the combination of our experience, reputation, and technical expertise are unmatched among companies of our size. This combination of skills has allowed us to pursue large-scale projects with fewer competitors. Contract Provisions and Subcontracting Our contracts are primarily obtained through competitive bidding. Occasionally, we obtain contracts through direct negotiations with customers.
This migration has the potential to reduce revenue growth and/or increase pressure on gross profit margins. We believe that the combination of our experience, reputation, and technical expertise are unmatched among companies of our size. This combination of skills has allowed us to pursue large-scale projects with fewer competitors.
These agreements cover all necessary union professions and are subject to renewal periodically. As of December 31, 2022, about 660, or 26%, of our employees were represented by a union. Estimated amounts for wage escalation related to the expiration of union contracts are included in our bids on various projects.
As of December 31, 2023, about 500, or 20%, of our employees were represented by 8 Table of Contents a union. Estimated amounts for wage escalation related to the expiration of union contracts are included in our bids on various projects. Diversity and Inclusion We employ a dynamic mix of people to create the strongest company possible.
Our government customers can also terminate, renegotiate or modify any of their contracts with us at their convenience. Anti-Corruption and Bribery We are subject to the Foreign Corrupt Practices Act (“FCPA”). The FCPA prohibits U.S. and other business entities from making improper payments to foreign government officials, political parties or political party officials.
Risk Factors ,” violation of specific laws and regulations could lead to fines, contract termination, debarment of contractors and/or suspension of future contracts. Our government customers can also terminate, renegotiate or modify any of their contracts with us at their convenience. Anti-Corruption and Bribery We are subject to the Foreign Corrupt Practices Act (“FCPA”).
Our safety team has created an atmosphere of safety at our projects which has results in a favorable loss experience factor. Our safety directors and site-specific safety managers work together to assess and control potential losses and liabilities both before and during our construction projects. Our safety record is in-line with industry standards.
Our safety directors and site-specific safety managers work together to assess and control potential losses and liabilities both before and during our construction projects. Our safety record is in-line with industry standards. In our industry, we are generally required to possess various types of surety bonds guaranteeing our completion of projects for most public and private customer contracts.
Our workforce was made up of approximately 2,500 employees as of December 31, 2022, of which 550 were salaried and 1,950 were hourly. 10 Table of Contents Union Workforce Several of our subsidiaries are a signatory to numerous local and regional collective bargaining agreements, both directly and through trade associations, as a union contractor.
Union Workforce. Several of our subsidiaries are a signatory to numerous local and regional collective bargaining agreements, both directly and through trade associations, as a union contractor. These agreements cover all necessary union professions and are subject to renewal periodically.
We are also subject to the applicable anti-corruption laws in the jurisdictions in which we operate, thus potentially exposing us to liability and potential penalties in multiple jurisdictions. The anti-corruption provisions of the FCPA are enforced by the Department of Justice while other state or federal agencies may seek recourse against the Company for issues related to FCPA.
The anti-corruption provisions of the FCPA are enforced by the Department of Justice while other state or federal agencies may seek recourse against the Company for issues related to FCPA. In addition, the Securities and Exchange Commission (“SEC”) requires strict compliance with certain accounting and internal control standards set forth under the FCPA.
Item 1. Business Overview “Southland” is a diverse leader in specialty infrastructure construction with roots dating back to 1900. We design and construct projects in the following end markets: bridges, tunnels, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipelines.
Item 1. Business 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.
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.
With the combined capabilities of these six subsidiaries, Southland has become a diversified industry leader with projects spanning North America in various end markets. 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.
Removed
At Southland, our mission is to build great things that shape our landscape and foster sustainable infrastructure for future generations. We do this with integrity, never compromising our ethics, and putting the safety and well-being of our employees, and stakeholders, first. Southland is based in Grapevine, Texas. It is the parent company of Johnson Bros.
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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. It is the parent company of Johnson Bros. Corporation, American Bridge Company, Oscar Renda Contracting, Southland Contracting, Mole Constructors, and Heritage Materials.
Removed
During the year ended December 31, 2022, and prior to the Merger, Legato II was a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.
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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.
Removed
Recent Developments On February 14, 2023, we consummated the Merger. At the closing of the Merger, among other things, Legato II issued 33,793,111 shares of Common Stock to the former members of Southland LLC in exchange for their membership interests in Southland LLC.
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This operational shift will allow the Company to better focus its resources on more profitable lines of business. Reportable Segments We manage Southland in two distinct segments: Civil and Transportation.
Removed
In connection with the Business Combination, Legato II change its name to “Southland Holdings, Inc.” Our Common Stock and Warrants are now listed on the NYSE under the symbols “SLND” and “SLNDW,” respectively. Reportable Segments We manage Southland in two distinct segments: Civil and Transportation.
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Our ability to negotiate change orders for the impact of weather on a project could impact our profitability. In addition, the impact of weather can cause significant variability in our quarterly revenue and profitability.
Removed
Our business may also be affected by overall economic market declines, delays in new projects, by changes in client schedules, or for other reasons.
Added
Contract Provisions and Subcontracting Our contracts are primarily obtained through competitive bidding. Occasionally, we obtain contracts through direct negotiations with customers. We are often invited to bid on projects with customers who maintain pre-qualified contractor lists.
Removed
Equipment ownership and ability to self-perform across numerous disciplines are two of our significant competitive advantages. These two advantages contribute to what sets us apart from our competition.
Added
The FCPA prohibits U.S. and other business entities from making improper payments to foreign government officials, political parties or political party officials. We are also subject to the applicable anti-corruption laws in the jurisdictions in which we operate, thus potentially exposing us to liability and potential penalties in multiple jurisdictions.
Removed
For the years ended December 31, 2022, December 31, 2021, and December 31, 2020, we did not have material impacts to our profitability due to increased costs. This does not mean that we will not incur increased costs due to increased costs in the future.
Added
On February 14, 2023, the Company consummated the previously announced merger contemplated by the Merger Agreement, dated as of May 25, 2022 (the “Merger Agreement”), by and among Southland Holdings, Inc. (known prior to February 14, 2023 as Legato Merger Corp. II), Southland Holdings LLC, a Texas limited liability company, and Legato Merger Sub, Inc., a Delaware corporation.
Removed
To date, we have been able to acquire the level of surety bonds necessary to support our business. Government Regulations Our business is subject to environmental, health and safety, government procurement, anti-bribery, and other government regulations and requirements.
Added
Upon the closing of the transactions contemplated in the Merger Agreement, we changed our name to Southland Holdings, Inc. Our principal executive offices are located at 1100 Kubota Dr., Grapevine, Texas 76051, and our telephone number is (817) 293-4263. Our Internet address is www.southlandholdings.com.
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We are not including the information contained in our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K.
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We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange 9 Table of Contents Act as soon as reasonably practicable after we electronically file such materials with, or furnish it to, the SEC.
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We also make available on our website the charters for our Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee and our Code of Business Conduct, which applies to all of our employees, including our executive officers. All such information is also available in print and free of charge to any of our stockholders who request it.
Added
In addition, we intend to disclose on our website any amendments to, or waivers from, our Code of Business Conduct that are required to be publicly disclosed pursuant to rules of the SEC. Additionally, all of our reports filed with the SEC are available via their website at sec.gov. ​

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe encourage our stockholders to carefully review the risk factors disclosed in this Annual Report in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky. 11 Table of Contents Risks Related to Our Business and Industry ● The COVID-19 pandemic has adversely impacted, and could continue to adversely impact, our business, financial condition and results of operations. ● We may lose business to competitors through competitive bidding processes. ● Our backlog is subject to unexpected adjustments and cancellations. ● The loss of one or more customers could have an adverse effect on us. ● The timing of new contract starts, including delays, cancellations and scope alterations, may result in unpredictable fluctuations in our business. ● We are vulnerable to the cyclical nature of the markets we serve. ● Demand for our services may increase or decrease during economic recessions or volatile economic cycles, and a reduction in demand in end markets may adversely affect our business. ● Adverse credit and financial market conditions could impair our, our customers’ and our partners’ borrowing capacity, which could negatively affect us. ● The nature of our contracts subjects us to risks associated with delays and cost overruns, which may not be recoverable and may result in reduced profits or losses that could have a material impact on us. ● If we are unable to accurately estimate contract risks, revenue or costs, economic factors such as inflation, the timing of new awards or the pace of project execution, we may incur a loss or achieve lower than anticipated profit. ● We may incur higher costs to lease, acquire and maintain equipment necessary for our operations. ● We use certain commodity products that are subject to significant price fluctuations. ● Supply chain interruptions, including availability of materials, products or equipment, may have a negative impact on our ability to complete projects. ● Some of our contracts have penalties for late completion. ● Weather can significantly affect our revenue and profitability. ● Climate change and related environmental issues could have a material adverse impact on us. ● If we are unable to attract and retain qualified managers and skilled employees, our operating costs may increase. ● We depend on key personnel and we may not be able to operate and grow our business effectively if we lose the services of any of our key persons or are unable to attract qualified and skilled personnel in the future. ● Our employees work on projects that are inherently dangerous and in locations where there are high security risks, and a failure to maintain a safe work site could result in significant losses. ● We may incur liabilities or suffer negative financial or reputational impacts relating to health and safety matters. ● We are dependent upon suppliers and subcontractors to complete many of our contracts. ● Our participation in joint ventures exposes us to liability and/or harm to our reputation for failures by our partners. ● Employee, agent or partner misconduct or our overall failure to comply with laws or regulations could impair our ability to compete for contracts. ● Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations. 12 Table of Contents ● We could be adversely affected by violations of the U.S.
Biggest changeRisks Related to Our Business and Industry ● We may lose business to competitors through competitive bidding processes. ● Our Backlog is subject to unexpected adjustments and cancellations. ● The loss of one or more customers could have an adverse effect on us. ● We are subject to risks related to government contracts and related procurement regulations. ● The timing of new contract starts, including delays, cancellations and scope alterations, may result in unpredictable fluctuations in our business. ● The nature of our contracts subjects us to risks associated with delays and cost overruns, which may not be recoverable and may result in reduced profits or losses that could have a material impact on us. ● If we are unable to accurately estimate contract risks, revenue or costs, economic factors such as inflation, the timing of new awards or the pace of project execution, we may incur a loss or achieve lower than anticipated profit. ● We may incur higher costs to lease, acquire and maintain equipment necessary for our operations. ● Supply chain interruptions, including availability of materials, products or equipment, may have a negative impact on our ability to complete projects. ● Some of our contracts have penalties for late completion. ● If we are unable to attract and retain qualified managers and skilled employees, our operating costs may increase. ● We depend on key personnel and we may not be able to operate and grow our business effectively if we lose the services of any of our key persons or are unable to attract qualified and skilled personnel in the future. ● Our employees work on projects that are inherently dangerous and in locations where there are high security risks, and a failure to maintain a safe work site could result in significant losses. ● We may incur liabilities or suffer negative financial or reputational impacts relating to health and safety matters. ● We are dependent upon suppliers and subcontractors to complete many of our contracts. ● Our participation in joint ventures exposes us to liability and/or harm to our reputation for failures by our partners. 10 Table of Contents ● Employee, agent or partner misconduct or our overall failure to comply with laws or regulations could impair our ability to compete for contracts. ● During the ordinary course of our business, we may become subject to material lawsuits or indemnity claims. ● Systems and information technology interruption and breaches in data security and/or privacy could adversely impact our ability to operate and negatively impact our results of operations. ● Our inability to recover on contract modifications against project owners or subcontractors for payment or performance could negatively affect our business. ● Our failure to adequately recover on affirmative claims brought by us against project owners or other project participants for additional contract costs could have a negative impact on our liquidity and future operations. ● We may experience delays and defaults in customer payments, and we may pay our suppliers and subcontractors before receiving payment from our customers for the related services, which could result in a material adverse effect on our business. ● The COVID-19 pandemic has adversely impacted, and could continue to adversely impact, our business, financial condition and results of operations. ● Our indebtedness could lead to adverse consequences or adversely affect our financial position and prevent us from fulfilling our obligations under such indebtedness, and any refinancing of this debt could be at significantly higher interest rates. ● Our bonding requirements may limit our ability to incur indebtedness, which could limit our ability to refinance our existing credit facilities or to execute our business plan. ● We may be unable to win new contracts if we cannot provide customers with letters of credit or performance or other bonds. ● It can be difficult and expensive to obtain the insurance we need for our business operations. ● We have international operations that are subject to foreign economic and political uncertainties and risks.
For example, a catastrophic natural disaster could negatively impact any of our office locations and the locations of our customers, has the potential to disrupt our and our customers’ businesses and may cause us to experience work stoppages, supply chain disruptions, project delays, financial losses and additional costs to resume operations, including increased insurance costs or loss of cover, legal liability and reputational losses.
For example, a catastrophic natural disaster could negatively impact any of our office locations and the locations of our customers or projects, has the potential to disrupt our and our customers’ businesses and may cause us to experience work stoppages, supply chain disruptions, project delays, financial losses and additional costs to resume operations, including increased insurance costs or loss of cover, legal liability and reputational losses.
These risks could result in project delays, cost overruns or other problems and can include the following: ● Incorrect assumptions related to productivity, scheduling estimates or future economic conditions, including with respect to the impacts of inflation contracts; ● Unanticipated technical problems, including design or engineering issues; ● Inaccurate representations of site conditions and unanticipated changes in the project execution plan; ● Project modifications creating unanticipated costs or delays and failure to properly manage project modifications; 16 Table of Contents ● Inability to achieve guaranteed performance or quality standards with regard to engineering, construction or project management obligations; ● Insufficient or inadequate project execution tools and systems needed to record, track, forecast and control cost and schedule; ● Reliance on historical cost and/or execution data that is not representative of current or future economic and/or execution conditions; ● Failure to accurately estimate the timing and cost of projects, including due to inflation, supply chain disruption, rising construction costs or unforeseen increases in the cost of labor; ● Unanticipated increases in the cost of raw materials, components or equipment, including due to inflation or the imposition of import tariffs; ● Failure to properly make judgments in accordance with applicable professional standards, including engineering standards; ● Failure to properly assess and update appropriate risk mitigation strategies and measures; ● Difficulties related to the performance of our customers, partners, subcontractors, suppliers or other third parties; ● Delays or productivity issues caused by weather; and ● Changes in local laws or difficulties or delays in obtaining permits, rights of way or approvals.
These risks could result in project delays, cost overruns or other problems and can include the following: ● Incorrect assumptions related to productivity, scheduling estimates or future economic conditions, including with respect to the impacts of inflation; ● Unanticipated technical problems, including design or engineering issues; ● Inaccurate representations of site conditions and unanticipated changes in the project execution plan; ● Project modifications creating unanticipated costs or delays and failure to properly manage project modifications; ● Inability to achieve guaranteed performance or quality standards with regard to engineering, construction or project management obligations; ● Insufficient or inadequate project execution tools and systems needed to record, track, forecast and control cost and schedule; ● Reliance on historical cost and/or execution data that is not representative of current or future economic and/or execution conditions; ● Failure to accurately estimate the timing and cost of projects, including due to inflation, supply chain disruption, rising construction costs or unforeseen increases in the cost of labor; ● Unanticipated increases in the cost of raw materials, components or equipment, including due to inflation or the imposition of import tariffs; ● Failure to properly make judgments in accordance with applicable professional standards, including engineering standards; ● Failure to properly assess and update appropriate risk mitigation strategies and measures; 14 Table of Contents ● Difficulties related to the performance of our customers, partners, subcontractors, suppliers or other third parties; ● Delays or productivity issues caused by weather; and ● Changes in local laws or difficulties or delays in obtaining permits, rights of way or approvals.
Acquisitions may expose us to operational challenges and risks, including, among others: ● The diversion of management’s attention from the day-to-day operations of the company; ● Managing a significantly larger company than before completion of an acquisition; ● The assimilation of new employees and the integration of business cultures; ● Training and facilitating our internal control processes within the acquired organization; ● Retaining key personnel; ● The integration of information, accounting, finance, sales, billing, payroll and regulatory compliance systems; ● Challenges in keeping existing customers and obtaining new customers; ● Challenges in combining service offerings and sales and marketing activities; ● The assumption of unknown liabilities of the acquired business for which there are inadequate reserves; ● The potential impairment of acquired goodwill and intangible assets; and ● The inability to enforce covenants not to compete.
Acquisitions may expose us to operational challenges and risks, including, among others: ● The diversion of management’s attention from the day-to-day operations of the company; ● Managing a significantly larger company than before completion of an acquisition; ● The assimilation of new employees and the integration of business cultures; ● Training and facilitating our internal control processes within the acquired organization; ● Retaining key personnel; ● The integration of information, accounting, finance, sales, billing, payroll and regulatory compliance systems; ● Challenges in keeping existing customers and obtaining new customers; ● Challenges in combining service offerings and sales and marketing activities; ● The assumption of unknown liabilities of the acquired business for which there are inadequate reserves; ● The potential impairment of acquired goodwill and intangible assets; and 21 Table of Contents ● The inability to enforce covenants not to compete.
Operating in the international marketplace exposes us to a number of risks including: ● Abrupt changes in government policies, laws, treaties (including those impacting trade), regulations or leadership; ● Embargoes or other trade restrictions, including sanctions; 26 Table of Contents ● Restrictions on currency movement; ● Tax or tariff changes and withholding requirements; ● Currency exchange rate fluctuations; ● Changes in labor conditions and difficulties in staffing and managing international operations, including logistical and communication challenges; ● U.S. government trade or other policy changes in relation to the foreign countries in which we operate; ● Other regional, social, political and economic instability, including recessions and other economic crises; ● Natural disasters and public health crises, including pandemics; ● Expropriation and nationalization of our assets; ● International hostilities; and ● Unrest, civil strife, acts of war, terrorism and insurrection.
Operating in the international marketplace exposes us to a number of risks including: ● Abrupt changes in government policies, laws, treaties (including those impacting trade), regulations or leadership; ● Embargoes or other trade restrictions, including sanctions; ● Restrictions on currency movement; ● Tax or tariff changes and withholding requirements; ● Currency exchange rate fluctuations; ● Changes in labor conditions and difficulties in staffing and managing international operations, including logistical and communication challenges; ● U.S. government trade or other policy changes in relation to the foreign countries in which we operate; ● Other regional, social, political and economic instability, including recessions and other economic crises; ● Natural disasters and public health crises, including pandemics; ● Expropriation and nationalization of our assets; ● International hostilities; and ● Unrest, civil strife, acts of war, terrorism and insurrection.
When we acquire a business, we may record an asset called “goodwill” for the excess amount we pay for the business over the net fair value of the tangible and identifiable intangible assets of the business we acquire.
When we acquire a business, we record an asset called “goodwill” for the excess amount we pay for the business over the net fair value of the tangible and identifiable intangible assets of the business we acquire.
We intend to retain all of our earnings for the foreseeable future to finance the operation and expansion of our business and do not anticipate paying cash dividends on our securities. As a result, you can expect to receive a return on your investment in our securities only if the market price of such securities increases. ​ Item 1B.
We intend to retain all of our earnings for the foreseeable future to finance the operation and expansion of our business and do not anticipate paying cash dividends on our securities. As a result, you can expect to receive a return on your investment in our securities only if the market price of such securities increases.
Our ability to perform work and meet customer schedules can be affected by weather conditions such as heat, wind, snow, ice and rain. Weather may affect our ability to work efficiently and can cause project delays and additional costs. Our ability to negotiate change orders for the impact of weather on a project could impact our profitability.
Our ability to perform work and meet customer schedules can be affected by weather conditions such as heat, wind, snow, ice, rain and named storms. Weather may affect our ability to work efficiently and can cause project delays and additional costs. Our ability to negotiate change orders for the impact of weather on a project could impact our profitability.
Our indebtedness could have important consequences, including but not limited to: ● Increasing our vulnerability to general adverse economic and industry conditions; 25 Table of Contents ● Requiring us to dedicate a substantial portion of our cash flow from operations to servicing our debt, thereby reducing the availability of cash to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; and ● Limiting our flexibility in planning for, or reacting to, challenges and opportunities, and changes in our businesses and the markets in which we operate.
Our indebtedness could have important consequences, including but not limited to: ● Increasing our vulnerability to general adverse economic and industry conditions; ● Requiring us to dedicate a substantial portion of our cash flow from operations to servicing our debt, thereby reducing the availability of cash to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; and ● Limiting our flexibility in planning for, or reacting to, challenges and opportunities, and changes in our businesses and the markets in which we operate.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Common Stock and Warrants are listed on NYSE, they are covered securities.
The National Securities Markets Improvement Act of 1996 (the “NSMIA”), which is a federal statute that prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Common Stock and Warrants are listed on NYSE, they are covered securities.
The COVID-19 pandemic has created volatility, uncertainty and economic disruption for the Company, our customers, subcontractors and suppliers and the markets in which we do business. The scope and impact of the COVID-19 pandemic continues to evolve, and new strains of the COVID-19 virus have emerged.
The COVID-19 pandemic had created volatility, uncertainty and economic disruption for the Company, our customers, subcontractors and suppliers and the markets in which we do business. The scope and impact of the COVID-19 pandemic continues to evolve, and new strains of the COVID-19 virus have emerged.
Some of the work performed under our contracts is performed by third-party subcontractors. We also rely on third-party suppliers to provide certain equipment and materials used for projects. If we are unable to hire qualified subcontractors or find qualified suppliers, our ability to successfully or timely complete a project could be impaired.
Some of the work performed under our contracts is performed by third-party subcontractors. We also rely on third-party suppliers to provide certain equipment and materials used for projects. If we are unable to hire qualified 17 Table of Contents subcontractors or find qualified suppliers, our ability to successfully or timely complete a project could be impaired.
If any of our third party insurers fail, abruptly cancel our coverage or otherwise cannot satisfy their obligations to us, then our overall risk exposure and operational expenses could increase and our business operations could be interrupted. We have international operations that are subject to foreign economic and political uncertainties and risks.
If any of our third party insurers fail, abruptly cancel our coverage or otherwise cannot satisfy their obligations to us, then our overall risk exposure and operational expenses could increase and our business operations could be interrupted. 23 Table of Contents We have international operations that are subject to foreign economic and political uncertainties and risks.
We have from time-to-time experienced, and may in the future experience, shortages of certain types of qualified personnel. For example, periodically there are shortages of engineers, project managers, field supervisors and other skilled workers capable of working on and supervising construction projects, as well as providing engineering services.
We have from time-to-time experienced, and may in the future experience, shortages of certain types of qualified personnel. For example, 16 Table of Contents periodically there are shortages of engineers, project managers, field supervisors and other skilled workers capable of working on and supervising construction projects, as well as providing engineering services.
It is possible that such adjustments could be significant and could have an adverse effect on our business. Our indebtedness could lead to adverse consequences or adversely affect our financial position and prevent us from fulfilling our obligations under such indebtedness, and any refinancing of this debt could be at significantly higher interest rates.
It is possible that such adjustments could be significant and could have an adverse effect on our business. 22 Table of Contents Our indebtedness could lead to adverse consequences or adversely affect our financial position and prevent us from fulfilling our obligations under such indebtedness, and any refinancing of this debt could be at significantly higher interest rates.
You may not be able to resell your securities at an attractive price due to a number of factors such as the following: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • the impact of the COVID 19 pandemic and its effect on our business and financial conditions; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • declines in the market prices of securities generally; 29 Table of Contents • strategic actions by us or our competitors; • announcements by our competitors of significant contracts, acquisitions, partnerships, other strategic relationships or capital commitments; • any significant change in our management; • changes in general economic or market conditions or trends in our industry or markets; • changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • future sales of our Common Stock or other securities; • investor perceptions or the investment opportunity associated with our securities relative to other investment alternatives; • the public’s response to press releases or other public announcements, including our filings with the SEC; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • the development and sustainability of an active trading market for our securities; • actions by institutional or activist stockholders; • changes in accounting standards, policies, guidelines, interpretations or principles; and • other events or factors, including those resulting from natural disasters, war, acts of terrorism or responses to these events.
You may not be able to resell your securities at an attractive price due to a number of factors, including, but not limited to, the following: ● results of operations that vary from the expectations of securities analysts and investors; ● results of operations that vary from those of our competitors; 26 Table of Contents ● the impact of the COVID-19 pandemic and its continued effect on our business and financial conditions; ● changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; ● declines in the market prices of securities generally; ● strategic actions by us or our competitors; ● announcements by our competitors of significant contracts, acquisitions, partnerships, other strategic relationships or capital commitments; ● any significant change in our management; ● changes in general economic or market conditions or trends in our industry or markets; ● changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business or industry; ● future sales of our Common Stock or other securities; ● investor perceptions or the investment opportunity associated with our securities relative to other investment alternatives; ● the public’s response to press releases or other public announcements, including our filings with the SEC; ● litigation or other disputes involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; ● guidance, if any, that we provide to the public, any changes in such guidance or our failure to meet such guidance; ● the development and sustainability of an active trading market for our securities; ● actions by institutional or activist stockholders; ● changes in accounting standards, policies, guidelines, interpretations or principles; and ● other events or factors, including those resulting from natural disasters, war, acts of terrorism, epidemics, pandemics or responses to such events.
Litigation or investigations relating to alleged or suspected violations of anti-bribery laws, even if ultimately such litigation or investigations demonstrate that we did not violate anti-bribery laws, could be costly and could distract management. 21 Table of Contents During the ordinary course of our business, we may become subject to material lawsuits or indemnity claims.
Litigation or investigations relating to alleged or suspected violations of anti-bribery laws, even if ultimately such litigation or investigations demonstrate that we did not violate anti-bribery laws, could be costly and could distract management. During the ordinary course of our business, we may become subject to material lawsuits or indemnity claims.
We are regularly subject to audits by tax authorities, and our tax estimates and tax positions 27 Table of Contents could be materially affected by many factors, including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our mix of earnings, the realizability of deferred tax assets and changes in uncertain tax positions.
We are regularly subject to audits by tax authorities, and our tax estimates and tax positions could be materially affected by many factors, including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our mix of earnings, the realizability of deferred tax assets and changes in uncertain tax positions.
Significant price fluctuations could have a material adverse effect on financial position, results of operations, cash flows and liquidity Supply chain interruptions, including availability of materials, products or equipment, may have a negative impact on our ability to complete projects. Our ability to complete projects may be affected by supply chain disruptions.
Significant price fluctuations could have a material adverse effect on financial position, results of operations, cash flows and liquidity 15 Table of Contents Supply chain interruptions, including availability of materials, products or equipment, may have a negative impact on our ability to complete projects. Our ability to complete projects may be affected by supply chain disruptions.
Risks Related to our Securities ● We are an “emerging growth company,” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors. ● An established market for our securities may not develop following consummation of the Business Combination. 13 Table of Contents ● NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject our securities to additional trading restrictions. ● The price of our securities may change significantly and you could lose all or part of your investment as a result. ● Future sales, or the perception of future sales, by the Company or our stockholders in the public market could cause the market price of our securities to decline. ● If securities analysts do not publish research or reports about our business or if they downgrade our securities or our sector, the price and trading volume of our securities could decline. ● Our actual operating and financial results in any given period may differ from guidance we provide to the public, including our most recent public guidance. ● We do not intend to pay dividends for the foreseeable future.
Risks Related to our Securities ● We are an “emerging growth company,” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors. ● An established market for our securities may not be sustained. ● NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject our securities to additional trading restrictions. ● The price of our securities may change significantly, and you could lose all or part of your investment as a result. ● Future sales, or the perception of future sales, by the Company or our stockholders in the public market could cause the market price of our securities to decline. ● If securities analysts do not publish research or reports about our business or if they downgrade our securities or our sector, the price and trading volume of our securities could decline. ● Our actual operating and financial results in any given period may differ from guidance we provide to the public, including our most recent public guidance. ● We do not intend to pay dividends for the foreseeable future.
In order to continue listing our securities on NYSE, we will be required to maintain certain financial, distribution and stock price levels. If NYSE delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market.
In order to continue listing our securities on NYSE, we will be required to maintain certain financial, distribution and stock price levels. If NYSE delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, our securities may be quoted on an over-the-counter market.
NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject our securities to additional trading restrictions. Currently, our Common Stock and Public Warrants are publicly traded on NYSE. We may be unable to maintain the listing of our securities in the future.
NYSE may delist Southland’s securities from trading on its exchange, which could limit investors’ ability to make transactions in its securities and subject Southland to additional trading restrictions. Currently, our Common Stock and Warrants are publicly traded on NYSE. We may be unable to maintain the listing of our securities in the future.
Although the states are preempted from regulating the sale of covered securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case.
Although the states are preempted from regulating the sale of covered securities, the NSMIA does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case.
Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials or others for the purpose of obtaining or retaining business.
Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. The U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials or others for the purpose of obtaining or retaining business.
In addition, we may need to incur additional debt in the future in the ordinary course of business. Our current debt and any future additional debt we may incur may impose significant operating and financial restrictions on us. A breach of any of these restrictions could result in a default.
In addition, we may need to incur additional debt in the future in the ordinary course of business. Our current debt and any future additional debt we may incur may impose significant operating and financial restrictions on us. A breach of any of these restrictions, including restrictions related to debt covenants, could result in a default.
The loss of one or more customers could have an adverse effect on us. A few customers, including the U.S. government, state and local governments and governmental agencies, comprise a significant portion of our revenue. Our customers may unilaterally reduce, fail to renew or terminate their contracts with us at any time.
The loss of one or more customers could have an adverse effect on us. A few customers, including the federal, state and local governments and governmental agencies, comprise a significant portion of our revenue. Our customers may unilaterally reduce, fail to renew or terminate their contracts with us at any time.
Our ability to generate cash is important for the funding of our operations, investing in ventures, the servicing of our indebtedness, paying dividends and making acquisitions.
Our ability to generate cash is important for the funding of our operations, investing in ventures, the servicing of our indebtedness and making acquisitions.
Additionally, such an attack could have a material adverse impact on our operations, reputation and financial results. In addition, various privacy and security laws and regulations requiring us to protect sensitive and confidential information from disclosure continue to evolve and pose increasingly complex compliance challenges.
Additionally, such an attack could have a material adverse impact on our operations, reputation and financial results. In addition, various privacy 19 Table of Contents and security laws and regulations requiring us to protect sensitive and confidential information from disclosure continue to evolve and pose increasingly complex compliance challenges.
Failure to effectively manage the integration process could adversely impact our business, financial condition, results of operations and cash flows. 24 Table of Contents Our financial results are based upon estimates and assumptions that may differ from actual results.
Failure to effectively manage the integration process could adversely impact our business, financial condition, results of operations and cash flows. Our financial results are based upon estimates and assumptions that may differ from actual results.
A failure by a third-party subcontractor or supplier to comply with applicable laws, rules or regulations could negatively impact our business and reputation and could result in fines, penalties or suspension. 20 Table of Contents Our participation in joint ventures exposes us to liability and/or harm to our reputation for failures by our partners.
A failure by a third-party subcontractor or supplier to comply with applicable laws, rules or regulations could negatively impact our business and reputation and could result in fines, penalties or suspension. Our participation in joint ventures exposes us to liability and/or harm to our reputation for failures by our partners.
In addition, the impact of weather can cause significant variability in our quarterly revenue and profitability. 18 Table of Contents Climate change and related environmental issues could have a material adverse impact on us.
In addition, the impact of weather can cause significant variability in our quarterly revenue and profitability. Climate change and related environmental issues could have a material adverse impact on us.
All the shares of Common Stock reserved for issuance under our equity incentive plan are expected to be registered on Form S 8 under the Securities Act and become eligible for sale in the public markets, subject to Rule 144 limitations applicable to affiliates.
All the shares of Common Stock reserved for issuance under our equity incentive plan are registered on Form S-8 under the Securities Act and upon issuance, are eligible for sale in the public markets, subject to Rule 144 limitations applicable to affiliates.
In addition, if we, or third parties working on our behalf or supplying equipment or material on our behalf, fail to meet guaranteed performance or quality standards, we may be held responsible under the guarantee or warranty provisions of our contract for cost impact to the customer, generally in the form of contractually agreed-upon liquidated damages or an obligation to re-perform work.
In addition, if we, subcontractors, suppliers or other third parties performing work or services on our behalf or supplying equipment or material on our behalf, fail to meet guaranteed performance or quality standards, we may be held responsible under the guarantee or warranty provisions of our contract for cost impact to the customer, generally in the form of contractually agreed-upon liquidated damages or an obligation to re-perform work.
As a result of the COVID-19 pandemic, we have experienced delays in certain bidding activities and also in legal proceedings and settlement discussions where we have claims against project owners or customers.
As a result of the COVID-19 pandemic, we have experienced delays in certain bidding activities and contract awards and also in legal proceedings and 20 Table of Contents settlement discussions where we have claims against project owners or customers.
Bank failures may cause financial losses where deposits are held in excess of FDIC, or other, insured limits. Bank failures, or changes in legislation and regulation, may adversely impact other entities that would, in turn, impact us.
Bank failures may cause financial losses where deposits are held in excess of Federal Deposit Insurance Corporation, or other, insured limits. Bank failures, or changes in legislation and regulation, may adversely impact other entities that would, in turn, impact us.
A failure to comply with these laws and regulations could result in civil or criminal sanctions, including the imposition of fines, the denial of export privileges and suspension or debarment from participation in U.S. government contracts. Compliance with and changes in tax laws could adversely affect our performance.
A failure to comply with these laws and regulations could result in civil or criminal sanctions, including the imposition of fines, the denial of export privileges and suspension or debarment from participation in federal contracts. 24 Table of Contents Compliance with and changes in tax laws could adversely affect our performance.
If these shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our Common Stock could decline. 30 Table of Contents Although the Initial Stockholders and certain Southland Members are subject to certain restrictions regarding the transfer of their shares of Common Stock, these shares may be sold after the expiration of their respective lock-ups.
If these shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our Common Stock could decline. 27 Table of Contents The Initial Stockholders and Southland Members are not subject to contractual restrictions regarding the transfer of their shares of Common Stock.
In some instances, we guarantee that we will complete a project by a certain date. If we subsequently fail to complete the project as scheduled, we may be held responsible for costs resulting from the delay, generally in the form of contractually agreed-upon liquidated damages.
If we subsequently fail to complete the project as scheduled, we may be held responsible for costs resulting from the delay, generally in the form of contractually agreed-upon liquidated damages.
Additionally, the initial stockholders of Legato II (the “Initial Stockholders”) and current and former management control a majority of our shares following consummation of the Business Combination, and a significant portion of these shares are subject to lockups which will result initially in limited liquidity of our securities. This could subject our securities to additional volatility.
Additionally, the initial stockholders of Legato II (the “Initial Stockholders”) and current and former management control a majority of our shares which will result in limited liquidity of our securities. This could subject our securities to additional volatility.
Compliance with evolving data privacy laws and regulations may cause us to incur additional costs, and any violation could result in damage to our reputation and/or subject us to fines, payment of damages, lawsuits and restrictions on our use of data, which could have a material adverse impact on our results of operations. 22 Table of Contents Our inability to recover on contract modifications against project owners or subcontractors for payment or performance could negatively affect our business.
Compliance with evolving data privacy laws and regulations may cause us to incur additional costs, and any violation could result in damage to our reputation and/or subject us to fines, payment of damages, lawsuits and restrictions on our use of data, which could have a material adverse impact on our results of operations.
Risks Relating Becoming a Public Company We are an “emerging growth company” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors. We are an “emerging growth company” as defined in the JOBS Act.
Risks Relating to Our Securities We are an “emerging growth company” and it cannot be ascertained whether the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors. We are an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act.
If we fail to implement appropriate safety procedures and/or if our procedures fail, our employees or others may suffer injuries or loss of life, the completion of a project could be delayed and we could experience investigations or litigation.
Unsafe work conditions also have the potential of increasing employee turnover, increasing project costs and raising our operating costs. If we fail to implement appropriate safety procedures and/or if our procedures fail, our employees or others may suffer injuries or loss of life, the completion of a project could be delayed and we could experience investigations or litigation.
We periodically present contract modifications to our customers and subcontractors for changes in contract specifications or requirements. We consider unapproved change orders to be contract modifications for which customers have not agreed to both scope and price.
Our inability to recover on contract modifications against project owners or subcontractors for payment or performance could negatively affect our business. We periodically present contract modifications to our customers and subcontractors for changes in contract specifications or requirements. We consider unapproved change orders to be contract modifications for which customers have not agreed to both scope and price.
There may be other adverse consequences to our business, financial condition and results of operations from the spread of COVID-19 that are not presently known or that have not yet become apparent.
There may be other adverse consequences to our business, financial condition and results of operations from the spread of COVID-19 that are not presently known or that have not yet become apparent. As a result, we cannot provide any assurance that the COVID-19 pandemic would not have a further adverse impact on our business, financial condition and results of operations.
In a slower economy, our customers may decide to outsource less infrastructure services, reducing demand for our services. In addition, consolidation, competition or capital constraints in the industries we serve may result in reduced spending by our customers. Adverse credit and financial market conditions could impair our, our customers’ and our partners’ borrowing capacity, which could negatively affect us.
In addition, consolidation, competition or capital constraints in the industries we serve may result in reduced spending by our customers. 13 Table of Contents Adverse credit and financial market conditions could impair our, our customers’ and our partners’ borrowing capacity, which could negatively affect us.
We cannot predict whether investors will find our Common Stock to be less attractive as a result of any reliance on these exemptions. If some investors find our Common Stock to be less attractive, there may be a less active trading market for our Common Stock and the price of our Common Stock may be more volatile.
If some investors find our Common Stock to be less attractive, there may be a less active trading market for our Common Stock and the price of our Common Stock may be more volatile.
The price of our securities may vary significantly due to a variety of reasons including but not limited to recession, shortages of durable and hard goods used at our properties, semiconductors used in the equipment that powers the 28 Table of Contents intellectual property that we develop, changes in interest rates, natural disasters and general market or economic conditions.
You may be unable to sell your securities unless a market can be established and sustained. The price of our securities may vary significantly due to a variety of reasons including but not limited to recession, shortages of durable and hard goods used at our properties, changes in interest rates, natural disasters and general market or economic conditions.
We are engaged in highly competitive businesses in which most customer contracts are awarded through bidding processes based on price and the acceptance of certain risks, along with other factors. We compete with other general and specialty contractors, regional, national and international, as well as small local contractors.
Risks Relating to Southland’s Business and Industry We may lose business to competitors through competitive bidding processes. We are engaged in highly competitive businesses in which most customer contracts are awarded through bidding processes based on price and the acceptance of certain risks, along with other factors.
Customers may be selective in how they allocate and expend their capital, which could result in a reduction of the number of projects we may bid on and win.
Customers may be selective in how they allocate and expend their capital, which could result in a reduction of the number of projects we may bid on and win. Many of the industries that we serve are vulnerable to general downturns, which in turn could materially and adversely affect the demand for our services.
In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could result in fines, injunctive relief or similar remedies which could be costly to us or limit our ability to operate. We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. The U.S.
In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could result in fines, revocation of operating licenses or permits, injunctive relief or similar remedies, as well as give rise to termination or cancellation rights under our contracts or disqualify from future bidding opportunities, which could be costly to us or limit our ability to operate. 18 Table of Contents We could be adversely affected by violations of the U.S.
We often work on complex projects, frequently in geographically remote or high-risk locations that are subject to political, social or economic risks or civil unrest. In those locations where we have employees or operations, we may expend significant efforts and incur substantial security costs to maintain safety.
Our employees work on projects that are inherently dangerous and in locations where there are high security risks, and a failure to maintain a safe work site could result in significant losses. We often work on complex projects, frequently in geographically remote or high-risk locations that are subject to political, social or economic risks or civil unrest.
Some of our contracts may have “termination for convenience” provisions in them. The loss of business from a significant customer could have a material adverse effect on our business, financial position and results of operations. The timing of new contract starts, including delays, cancellations and scope alternations, may result in unpredictable fluctuations in our business.
Should one or more of these events occur, it could have a material adverse effect on our financial position, results of operations, cash flows and liquidity. The timing of new contract starts, including delays, cancellations and scope alternations, may result in unpredictable fluctuations in our business.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies.
In addition, Section 13(a) of the Exchange Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We intend to take advantage of the extended transition period for adopting new or revised accounting standards under the JOBS Act as an emerging growth company.
Further, our results of operations have historically fluctuated, and may continue to fluctuate, quarterly and annually depending on when new awards occur and the commencement and progress of work on projects already awarded. 17 Table of Contents We may incur higher costs to lease, acquire and maintain equipment necessary for our operations.
Changes in laws, policies or regulations, including tariffs and taxes, could impact the prices for materials or equipment. Further, our results of operations have historically fluctuated, and may continue to fluctuate, quarterly and annually depending on when new awards occur and the commencement and progress of work on projects already awarded.
We source input materials, including raw materials, products and or equipment, from domestic suppliers and suppliers from other geographies. In some cases, the downstream effect of supply chain issues will be compounded by delays impacting our suppliers. Some of our contracts have penalties for late completion.
In some cases, the downstream effect of supply chain issues will be compounded by delays impacting our suppliers. Some of our contracts have penalties for late completion. In some instances, we guarantee that we will complete a project by a certain date.
Many of our customers require that we meet certain safety criteria to be eligible to bid on contracts, and some of our contract fees or profits are subject to satisfying safety criteria. Unsafe work conditions also have the potential of increasing employee turnover, increasing project costs and raising our operating costs.
Safety is a primary focus of our business and is critical to our reputation and performance. Many of our customers require that we meet certain safety criteria to be eligible to bid on contracts, and some of our contract fees or profits are subject to satisfying safety criteria.
If we fail to find a suitable replacement for any departing executive or senior officer on a timely basis, such departure could adversely affect our ability to operate and grow our business. 19 Table of Contents Our employees work on projects that are inherently dangerous and in locations where there are high security risks, and a failure to maintain a safe work site could result in significant losses.
If we fail to find a suitable replacement for any departing executive or senior officer on a timely basis, such departure could adversely affect our ability to operate and grow our business.
Our bonding requirements may limit our ability to incur indebtedness, which could limit our ability to refinance our existing credit facilities or to execute our business plan. Our ability to obtain surety bonds depends upon various factors including our capitalization, working capital, tangible net worth and amount of our indebtedness.
Our bonding requirements may limit our ability to incur indebtedness, which could limit our ability to refinance our existing credit facilities or to execute our business plan.
A substantial portion of our revenue and profit is generated from construction projects, the awarding of which we do not directly control.
Demand for our services may increase or decrease during economic recessions or volatile economic cycles, and a reduction in demand in end markets may adversely affect our business. A substantial portion of our revenue and profit is generated from construction projects, the awarding of which we do not directly control.
If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, the price and trading volume of our securities could decline. The trading market for our securities will rely in part on the research and reports that industry or financial analysts publish about the Company or its business.
The market price of our Common Stock could decline if such holders sell their shares or are perceived by the market as intending to sell them. If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, the price and trading volume of our securities could decline.
Further, there is no guarantee that the exemptions available under the JOBS Act will result in significant savings. To the extent that we choose not to use exemptions from various reporting requirements under the JOBS Act, we will incur additional compliance costs, which may impact our financial condition.
To the extent that we choose not to use exemptions from various reporting requirements under the Exchange Act, we will incur additional compliance costs, which may impact our financial condition. 25 Table of Contents An established market for our securities may not be sustained. An active trading market for our securities may not be sustained.
In addition, our project sites can place our employees and others near large equipment, dangerous processes or substances or highly regulated materials and in challenging environments. Safety is a primary focus of our business and is critical to our reputation and performance.
In those locations where we have employees or operations, we may expend significant efforts and incur substantial security costs to maintain safety. In addition, our project sites can place our employees and others near large equipment, dangerous processes or substances or highly regulated materials and in challenging environments.
In addition, if customers fail to pay us for work we perform, we could experience a material adverse effect on our business and profitability. 23 Table of Contents In connection with acquisitions or divestitures, we may become subject to liabilities.
In addition, if customers fail to pay us for work we perform, we could experience a material adverse effect on our business and profitability. The COVID-19 pandemic has adversely impacted, and could continue to adversely impact, our business, financial condition and results of operations.
The strong competition in our markets requires maintaining skilled personnel and investing in technology and also puts pressure on profit margins. We do not obtain contracts from all of our bids and our inability to win bids at acceptable profit margins could adversely affect our business. 14 Table of Contents Our backlog is subject to unexpected adjustments and cancellations.
Some of our competitors may have greater resources which may result in a decrease in new awards, a decrease in profit margins, or both. We do not obtain contracts from all of our bids and our inability to win bids at acceptable profit margins could adversely affect our business. Our Backlog is subject to unexpected adjustments and cancellations.
We will not control these analysts. In addition, some financial analysts may have limited expertise with our model and operations.
The trading market for our securities will rely in part on the research and reports that industry or financial analysts publish about the Company or its business. We have no control over such analysts and their reports relating to our business. In addition, some financial analysts may have limited expertise with our model and operations.
As a result, you will be relying solely on the appreciation in value of our securities to achieve a return on your investment. Risks Relating to our Business and Industry The COVID-19 pandemic has adversely impacted, and could continue to adversely impact, our business, financial condition and results of operations.
As a result, you will be relying solely on the appreciation in value of our securities to achieve a return on your investment. 11 Table of Contents ● We are a “controlled company” that could take advantage of exemptions to certain corporate governance requirements under NYSE rules in the future.
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Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. ● During the ordinary course of our business, we may become subject to material lawsuits or indemnity claims. ● Systems and information technology interruption and breaches in data security and/or privacy could adversely impact our ability to operate and negatively impact our results of operations. ● Our inability to recover on contract modifications against project owners or subcontractors for payment or performance could negatively affect our business. ● Our failure to adequately recover on affirmative claims brought by us against project owners or other project participants for additional contract costs could have a negative impact on our liquidity and future operations. ● We may experience delays and defaults in customer payments, and we may pay our suppliers and subcontractors before receiving payment from our customers for the related services, which could result in a material adverse effect on our business. ● In connection with acquisitions or divestitures, we may become subject to liabilities. ● If we fail to integrate acquisitions successfully, we may experience operational challenges and risks, which may have an adverse effect on our business. ● Our financial results are based upon estimates and assumptions that may differ from actual results. ● Our reported results of operations could be adversely affected as a result of impairments of goodwill, other identifiable intangible assets or investments. ● Our accounting for revenue recognized over time could result in a reduction or elimination of previously reported revenue and profit. ● Our indebtedness could lead to adverse consequences or adversely affect our financial position and prevent us from fulfilling our obligations under such indebtedness, and any refinancing of this debt could be at significantly higher interest rates. ● Our bonding requirements may limit our ability to incur indebtedness, which could limit our ability to refinance our existing credit facilities or to execute our business plan. ● We may be unable to win new contracts if we cannot provide customers with letters of credit or performance or other bonds. ● It can be difficult and expensive to obtain the insurance we need for our business operations. ● We have international operations that are subject to foreign economic and political uncertainties and risks.
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We encourage our stockholders to carefully review the risk factors disclosed in this Annual Report in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky.
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Unexpected and adverse changes in the foreign countries in which we operate could result in project disruptions, increased cost and potential losses. ● Foreign currency risks could have an adverse impact on revenue, earnings and/or backlog. ● We could be adversely impacted if we fail to comply with domestic and international import and export laws. ● Compliance with and changes in tax laws could adversely affect our performance. ● Bank failures or intervention by banking regulators may have an adverse impact on our business.
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Unexpected and adverse changes in the foreign countries in which we operate could result in project disruptions, increased cost and potential losses.
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As a result, we cannot we provide any assurance that if the COVID-19 pandemic continues, it would not have a further adverse impact on our business, financial condition and results of operations. We may lose business to competitors through competitive bidding processes.
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We compete with other general and specialty contractors, regional, national and international, as well as small local contractors. The strong competition in our markets requires maintaining skilled personnel and investing in technology and also puts pressure on profit margins.
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Many of the industries that we serve are vulnerable to general downturns, which in turn could materially and adversely affect the demand for our services. 15 Table of Contents Demand for our services may increase or decrease during economic recessions or volatile economic cycles, and a reduction in demand in end markets may adversely affect our business.
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Some of our contracts may have “termination for convenience” provisions in them. In addition, a significant reduction in government spending or a change in budgetary priorities could reduce demand for our services, cancel or delay projects. The loss of business from a significant customer could have a material adverse effect on our business, financial position and results of operations.
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Changes in laws, policies or regulations, including tariffs and taxes, could impact the prices for materials or equipment.
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We are subject to risks related to government contracts and related procurement regulations. Our contracts with federal, state, local and foreign government entities and agencies are subject to various procurement regulations and other requirements relating to their formation, administration and performance. Government contracts expose us to a variety of risks that differ from those associated with private sector contracts.
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An established market for our securities may not develop following consummation of the Business Combination. An active trading market for our securities may never develop or, if developed, it may not be sustained.
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Various statutes to which our operations are subject, including, among others, the Davis-Bacon Act (which regulates wages and benefits), the Walsh-Healy Act (which prescribes a minimum wage and regulates overtime and working conditions), Executive Order 11246 (which establishes equal employment opportunity and affirmative action requirements) and the Drug-Free Workplace Act, provide for mandatory suspension and/or debarment of contractors in certain circumstances involving statutory violations.
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You may be unable to sell your securities unless a market can be established and sustained.
Added
In addition, the Federal Acquisition Regulation and various state statutes provide for discretionary suspension and/or debarment in certain circumstances that might call into question a contractor’s willingness or ability to act responsibly, including as a result of being convicted of, or being found civilly liable for, fraud or a criminal offense in connection with obtaining, attempting to obtain or performing a public contract or subcontract.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our headquarters is in Grapevine, Texas. We own and lease other facilities throughout the United States and Canada. Our facilities include permanent and temporary office space, equipment yards, storage yards, maintenance facilities, shops, warehouses, training and education facilities, and other permanent and temporary locations as needed in our business.
Biggest changeItem 2. Properties Our headquarters is in Grapevine, Texas. We own and lease other facilities throughout the United States and Canada.
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Our facilities include permanent and temporary office space, equipment yards, storage yards, maintenance facilities, shops, warehouses, training and education facilities, and other permanent and temporary locations as needed in our business, all of which are used by both our Civil and Transportation segments. ​ Item 3.
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Legal Proceedings Legal proceedings are discussed in Note 17 of the Notes to Consolidated Financial Statements and are incorporated herein by reference. ​ Item 4. Mine Safety Disclosures Not applicable. ​ PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Legato II’s Common Stock and Warrants were historically listed on the Global Market of The Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “LGTO” and “LGTOW,” respectively.
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Stock, and Warrants are publicly traded on the NYSE American LLC under the symbols “SLND” and “SLND WS”, respectively.
Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors (our “Board”) and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant.
Any decision to declare and pay dividends in the future will be made at the discretion of the Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant.
In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we incur. We do not anticipate declaring any cash dividends to holders of Common Stock in the foreseeable future. ​ ​ Item 6. Reserved ​
In addition, our ability to pay dividends may be limited by covenants of any 31 Table of Contents existing and future outstanding indebtedness we incur. We do not anticipate declaring any cash dividends to holders of Common Stock in the foreseeable future. ​
Holders As of February 27, 2023, we had 44,407,831 shares of Common Stock issued and outstanding held of record by 1,399 holders. Such numbers do not include Depository Trust Company participants or beneficial owners holding shares through nominee names. Dividends We have not paid any cash dividends on our Common Stock to date.
Holders As of February 27, 2024, we had 47,943,861 shares of Common Stock issued and outstanding held of record by 1,461 holders. Such numbers do not include Depository Trust Company participants or beneficial owners holding shares through nominee names. Dividends We have not paid any cash dividends on our Common Stock to date.
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Following the consummation of the Business Combination, our Common Stock and Public Warrants were listed on the Global Market of Nasdaq under the symbols “SLND” and “SLNDW,” respectively. On March 2, 2023, our Common Stock and Warrants were listed on NYSE under the symbols “SLND” and “SLNDW,” respectively.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations References to the “Company,” “our,” “us,” “we,” or “Southland” refer to Southland Holdings, Inc. (formerly known as Legato Merger Corp. II). The following discussion and analysis contain forward-looking statements relating to future events or our future financial performance, which involve risk and uncertainties.
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Item 7. Management Discussion and Analysis ” in this Annual Report. ​ BASIS OF PRESENTATION On May 25, 2022, Legato Merger Corp.
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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 “Forward-Looking Statements” section for a discussion of some of the uncertainties, risks, and assumptions associated with these statements.
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II, a Delaware corporation (“Legato II” and, after the Merger as described below “Southland”), 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”).
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The following discussion and analysis present information that we believe is relevant to an assessment and understanding of our consolidated balance sheets, statements 32 Table of Contents of cash flows, and results of operations. This information should be read in conjunction with the consolidated financial statements and the notes.
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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”).
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Overview During the year ended December 31, 2022, and prior to the Merger, Legato II was a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses or entities.
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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.
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For more information on the Merger, see “Basis of Presentation” elsewhere in this Annual Report. ​ Following the Merger, Southland is a diverse leader in specialty infrastructure construction with roots dating back to 1900. We design and construct projects in the following end markets: bridges, tunnels, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipelines.
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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. The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued.
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At Southland, our mission is to build great things that shape our landscape and foster sustainable infrastructure for future generations. We do this with integrity, never compromising our ethics, and putting the safety and well-being of our employees, and stakeholders, first. Southland is based in Grapevine, Texas. It is the parent company of Johnson Bros.
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As such, reporting periods prior to the three months ended March 31, 2023, will not present share or per share data. Holders of 25,193,748 shares of Legato II common stock elected to have their shares redeemed in connection with the Business Combination.
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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.
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At the closing of the Business Combination, the Company issued 33,793,111 shares of common stock to the former members of Southland (“Southland Members”) in exchange for their membership interests in Southland (“Southland Membership Interests”).
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Key Factors Affecting Results of Operations after the Merger 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.
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Our common stock, par value $0.0001 per share (“Common Stock”), and redeemable warrants, exercisable for shares of Common Stock at an exercise price of $11.50 per share (“Warrants”), trade on NYSE under the symbols “SLND” and “SLND WS,” respectively. ​ ​ 2 Table of Contents Part I
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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.
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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.
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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.
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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.
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Although the construction business is highly competitive, there are few, if any, companies which compete in all of our 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.
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Equipment ownership and ability to self-perform across numerous disciplines are two of our significant competitive advantages. These two advantages contribute to what sets us apart from our competition.
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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, 33 Table of Contents 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.
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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.
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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 on 2022, and other federal, state, or local initiatives.
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We believe that the combination of our experience, reputation, and technical expertise are unmatched 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.
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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.
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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.
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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.
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Key Business Metrics after the Merger Backlog We define backlog as a measure of the total amount of revenue remaining to be earned on projects that have been awarded. We only include a project in our backlog once we have an executed contract, or authorized notice to proceed.
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As a result, we believe our backlog is firm, although cancellations or scope adjustments may occur. In our industry, backlog is an indicator of future revenue streams for work that has been awarded but not completed. We define backlog as anticipated revenue from the uncompleted portion of existing contracts and therefore can be estimated.
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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.
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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. Our contracts do not typically grant us rights to revenue reflected in backlog.
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Projects may remain in 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 be included within our backlog amount. Non-GAAP Financial Measures In addition to financial results determined in accordance with U.S.
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GAAP, in our industry, it is customary to manage our business using earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”).
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EBITDA assists management and our Board 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. 34 Table of Contents ​ Critical Accounting Policies and Estimates The preparation of consolidated financial statements in conformity with the accounting principles generally accepted in the United States (“U.S.
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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.
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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 by management. 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.
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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 will be reflected in the consolidated financial statements in future periods. The following discussion addresses the items we have identified as our critical accounting estimates.
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Investments held in Trust Account Legato II’s portfolio of investments prior to the Business Combination was comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof.
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Legato II’s investments held in the Trust Account were classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in investment income on Trust Account in the accompanying statement of operations.
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The estimated fair values of investments held in the Trust Account are determined using available market information.
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Accounting for 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”).
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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.
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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.
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Common Stock Subject to Possible Redemption Legato II accounted for its common stock subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value.
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Conditionally redeemable common stock (the 27,600,000 public shares, including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within Legato II’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity.
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Legato II’s common stock sold in the IPO features certain redemption rights that are considered to be outside of its control and subject to occurrence of uncertain future events.
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Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of Legato II’s consolidated condensed balance sheets. 35 Table of Contents Legato II recognizes changes in redemption value as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period.
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Immediately upon the closing of the IPO, Legato II recognized the accretion from initial book value to redemption amount. The change in the carrying value of redeemable shares of common stock resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
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Subsequently, Legato II recognizes changes in the redemption value as a accretion as reflected on the accompanying unaudited consolidated condensed statements of changes in stockholders’ deficit.
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Net Loss per Common Share Legato II complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income per share is computed by dividing net income applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period.
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The Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of 27,600,000 shares of Public Shares in the calculation of diluted earnings per share, since their inclusion would be anti-dilutive under the treasury stock method.
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As a result, diluted earnings per share is the same as basic earnings per share for the periods. Post Merger Revenue Recognition We recognize revenue over time as we satisfy our performance obligations.
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We generally use an input method measured by comparing actual costs incurred to date to total estimated costs for the project to recognize revenue as it is the best available method to recognize the progress of satisfying our performance obligations and transfer of control to our customers.
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Due to the nature of our industry the use of this method requires us to make material estimates and assumptions that are subject to a high degree of uncertainty.
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To determine estimated transaction price and estimated cost at completion we rely on our experience, and outside expert opinions on an as needed basis, with particular types of projects and customers using information that is reasonably available to us.
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An estimated transaction price can be impacted by numerous items related to variable consideration, including but not limited to: claims, approved and pending changes orders, unpriced change orders, completion incentives, liquidated damages, penalties, and other contractual provisions.
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An estimated cost at completion may fluctuate based on numerous items, including but not limited to: ​ • Complexity in original design, • Owner-directed changes, • Non-owner directed factors that necessitate change in scope or construction methodology, • Differing site conditions, • Productivity, • Availability and cost of labor, equipment, or materials, • Weather, • Changes in technology, • Governmental or environmental restrictions, • Subcontractor and joint venture partner performance, • Expected cost of warranties, • Insurance costs, and • Time to recover, or not recover, additional contract costs. ​ We recognize the impact of any changes in estimated transaction price or estimated cost at completion on a cumulative catch-up basis.
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This can result in the recognition of revenue in a current period related to the satisfaction of performance obligations that occurred or partially occurred in a prior period. This can also result in the reversal of revenue recognized in a prior period, in the current period.
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If it is estimated that a project will have costs in excess of expected revenues, we recognize the full loss in that period and any adjustments to that expected loss in the period in which that change in expected loss may be identified. 36 Table of Contents Recently Issued Accounting Pronouncements Our management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements.
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Results of Operations Legato II’s activities through December 31, 2022 and 2021, respectively, were organizational activities, those necessary to prepare for the IPO and, after the IPO, identify a target company for a business combination and consummating such business combination. It neither engaged in any operations nor generated any revenues.
Removed
For the year ended December 31, 2022, Legato II had a net income of $1,931,302, which consisted of operating costs of $1,281,634 and an income tax expense of $800,905, offset by non-operating income in the form of interest income on marketable securities held in the trust account of $4,013,841.
Removed
For the period from July 14, 2021 (inception) to December 31, 2021, Legato II had a net loss of $138,439, which consisted of operating costs of $162,602, offset by non-operating income in the form of interest income on marketable securities held in the trust account of $24,163.
Removed
Liquidity and Capital Resources Unless noted otherwise, the below discussion of liquidity and capital resources refers to Legato II prior to the closing of the Merger and to Southland after the closing of the Merger.
Removed
Legato II’s liquidity needs prior to the consummation of the IPO were satisfied through the payment of $25,000 from the initial stockholder exchange for issuance of Founder Shares (as defined in Note 5), and loan proceeds from Eric Rosenfeld, Legato II’s former Chief SPAC Officer, of $65,000 under the Note (as defined in Note 5).
Removed
The Note balance was settled on November 26, 2021, shortly after the consummation of the IPO. The facility was no longer available as of December 31, 2022. Subsequent to the consummation of the IPO through the consummation of the Business Combination, Legato II’s liquidity was satisfied through the net proceeds held outside of the trust account.
Removed
As of December 31, 2022, Legato II had $231,519 in cash and a working capital balance of $208,601. Legato II did not have any off-balance sheet arrangements as of December 31, 2022, and 2021, respectively. Legato II did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
Removed
Southland’s principal sources of liquidity are cash generated from operations, funds from borrowings, and existing cash on hand. We enter into secured notes and mortgage notes in order to finance growth within our business, and we also enter into equipment notes in order to complete certain specialty construction projects.
Removed
Our principal uses of cash typically include the funding of working capital obligations, debt service, and investment in machinery and equipment for our projects.
Removed
Based on historical and anticipated future operating results, we believe cash flow from operations, available cash, amounts available to us under our revolving credit agreement, and other financing 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.
Removed
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.
Removed
If such a material adverse event were to occur, we may be unable to borrow under our revolving credit agreement or may be required to seek additional financing.
Removed
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. ​ 37 Table of Contents ​ ​ Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. ​ Item 8.
Removed
Financial Statements and Supplementary Data Reference is made to Pages F-1 through F-17 comprising a portion of this Annual Report on Form 10-K. ​ ​ Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. ​

Other SLND 10-K year-over-year comparisons