Southland Holdings, Inc.
For the period ended Mar 31, 2026. Filed May 12, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 12, 2026
SLND$0.68-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-12.
0001104659-25-110523
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-12.
0001104659-26-059468
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 118 previous paragraphs and 95 current paragraphs.
58 unchanged; 23 reworded; 14 added; 33 removed; 4 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Income tax expense for the three months ended March 31, 2026, had an effective rate of (0.1%). The primary differences between the federal statutory tax rate of 21% and the effective rate were valuation allowance adjustments against subsidiaries’ net deferred tax assets and state income taxes.
Current report
Revenue for the three months ended March 31, 2026, was $103.8 million, an increase of $0.9 million, or 0.9%, compared to the three months ended March 31, 2025. The increase was primarily attributable to increased revenues of $14.3 million from a data center project in the West due to the project being substantially started after March 31, 2025, offset by a $6.4 million decrease from a tunnel project in the West due to the project approaching completion and a $6.2 million decrease from a water facility project in the Northwest due to the project approaching completion.
Current report
Revenue for the three months ended March 31, 2026, was $68.6 million, a decrease of $68.0 million, or 49.8%, compared to the three months ended March 31, 2025. The decrease was primarily attributable to decreased revenues of $23.6 million from an elevated roadway and bridge project in the Southeast, $9.0 million from a project in the Bahamas, $5.0 million from a Bridge project in the Southeast and $4.7 million from a bridge repair project in the West, all of which decreased due to the projects approaching completion. The decrease was also primarily related to decreased revenues of $13.0 million from a canal widening project in the South due to an unfavorable adjustment related to dispute resolutions and $7.1 million from the M&P business line.
Current report
Gross loss for the three months ended March 31, 2026, was $19.4 million, or (28.3)% of segment revenue, compared to gross loss of $1.2 million, or (0.8)% of segment revenue, for the three months ended March 31, 2025. The primary driver to the increase in gross loss of $18.3 million was primarily due to decreases in profit contributions of $13.0 million from a canal widening project in the South and $6.4 million from a M&P project in the Southeast, both due to unfavorable adjustments related to dispute resolutions.
Current report
During the fourth quarter of the year ended December 31, 2025, the Company experienced certain liquidity-related challenges resulting primarily from an adverse court ruling related to the WSCC Project (defined below) that resulted in the Company being assessed a judgment of approximately $89.1 million, inclusive of principal, fees, and interest. The ruling limited the Company’s enforceable right to recover amounts previously expected to be realized from claims associated with the project.
Current report
Following the adverse ruling, certain sureties of the Company purchased and assumed rights and obligations as lenders under the Company’s Credit Agreement. In connection with the sureties’ assumption of rights and obligations under the Credit Agreement, the Company entered into side letters with the sureties, pursuant to which the sureties waived all events of default and breaches of covenants and all principal and interest payments under the Credit Agreement until maturity.
Current report
Additionally, under existing GIAs, certain sureties advanced funds to support bonded project obligations and ongoing project performance. As of March 31, 2026 and December 31, 2025, the sureties had advanced $139.2 million and $14.1 million, respectively. These amounts are included in surety payable on our unaudited condensed consolidated balance sheets. Repayment of these amounts is not required prior to at least May 13, 2027.
Current report
On March 27, 2026, the Company entered into a settlement agreement on the WSCC Project. Certain sureties of the Company previously paid a portion of the judgement against the Company and are required to pay an additional amount under the settlement agreement. The Company and the sureties are negotiating repayment terms for the amounts paid by the sureties on behalf of the Company under a long-term financing agreement. The sureties have agreed to forbear on seeking repayment for these amounts until at least May 13, 2027. The $89.1 million judgment is included in surety payable on our unaudited condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025.
Current report
Based on the Company’s current cash position, expected operating cash flows, existing backlog, and the actions taken by management to address recent liquidity challenges, management believes that the Company has sufficient liquidity to meet its operational and financial obligations as they come due for at least the next twelve months.
Current report
After giving effect to the Assignment and Assumption Agreement (defined below), the Credit Facility has a maturity date of September 30, 2028.
Current report
On March 17, 2026, the Company entered into an assignment and assumption (the “Assignment and Assumption Agreement”) with Callodine Commercial Finance, LLC (the “Resigning Agent”), solely in its capacity as “Agent” under the Credit Agreement, lenders party to the Credit Agreement (individually, an “Assignor,” and collectively, the “Assignors”), the assignees parties thereto (individually, an “Assignee,” and collectively, the “Assignees”), and Alana Porrazzo, in her capacity as Trustee of the Southland Collateral Trust, as successor agent. The Assignees include the surety providers of the Company, Berkshire Hathaway Specialty Insurance Company (“Berkshire”), Markel Insurance Company (“Markel”) and Zurich American Insurance Company (“Zurich”), Western Surety Company, Euler Hermes North America Insurance Company, Federal Insurance Company, and Hartford Fire Insurance Company.
Current report
Pursuant to the Assignment and Assumption Agreement, the Company paid the Resigning Agent, for the benefit of the Resigning Agent and the Assignors, approximately $15.4 million with respect to the loans of which approximately $14.4 million consisted of principal and approximately $1.0 million consisted of accrued interest and fees. Also, each Assignor sold and assigned to the Assignees, and each Assignee purchased and assumed from the Assignors, all of each such Assignor’s (i) right, title and interest to loans under the Credit Agreement, and (ii) rights and obligations, solely as a lender, under the Credit Agreement and related loan documents (including the Assignor’s right, title and interest in any collateral securing obligations under the Credit Agreement) (the “Assigned Interest”). The aggregate principal amount of loans comprising the Assigned Interest is approximately $110.0 million, and the Assignees agreed to pay an aggregate purchase price of approximately $110.0 million to the Resigning Agent for the ratable benefit of the Assignors.
Current report
Concurrently with the assignment of the Assigned Interests, the delayed draw term loan commitment under the Credit Agreement was terminated and is of no further force or effect.
Current report
Additionally, pursuant to side letters executed after the Assignment and Assumption Agreement, the Assignees have agreed to waive quarterly principal and monthly interest payments for all periods until maturity. In addition, the Assignees have agreed to waive any and all defaults and potential defaults and covenant violations under the Credit Agreement, including any violations that existed as of March 31, 2026 or December 31, 2025. As consideration for the foregoing, the Company has agreed to dispose of idle equipment and other assets and pursue claim collections to use the proceeds from the aforementioned transactions to make payments towards the principal balance of the loan prior to maturity.
Removed paragraphs (33)
Previous report
Valuation Allowances for Deferred Tax Assets
Previous report
We record income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. We assess the likelihood that our deferred tax
Previous report
assets will be recoverable based on expected future taxable income. To the extent that we determine it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized, we establish a valuation allowance.
Previous report
To the extent valuation allowances are established or increased in a period, we include an expense within the tax provision in our condensed consolidated statements of operations. During the third quarter of 2025, we recognized a valuation allowance of $62.5 million related to the Company’s net operating loss carryforward and other net deferred tax assets, which led to a $57.3 million non-cash expense, which is presented in the income tax expense (benefit) row in the condensed consolidated statement of operations, relating to the deferred tax asset valuation allowance. These valuation allowances may be released in future years when it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, we will periodically evaluate whether or not all available evidence, such as future income and reversal of temporary differences, tax planning actions, and recent results of operations, provides sufficient positive evidence to offset any other negative evidence that may exist at such time. In the event the deferred tax valuation allowance is released, we would record an income tax benefit for a portion or all of the deferred tax valuation allowance released.
Previous report
Comparisons of the Three Months Ended September 30, 2025 to the Three Months Ended September 30, 2024
Previous report
Revenue for the three months ended September 30, 2025, was $213.3 million, an increase of $40.0 million, or 23.1%, compared to the three months ended September 30, 2024. The increase was attributable to a $43.6 million increase in revenue in our Civil segment, offset by a $3.6 million decrease in revenue in our Transportation segment, both primarily due to projects approaching completion and the absence of certain prior year net unfavorable adjustments.
Previous report
Selling, general, and administrative expenses for the three months ended September 30, 2025, were $14.6 million, a decrease of $2.9 million, or 16.6%, compared to the three months ended September 30, 2024. The decrease was primarily due to a $2.2 million decrease in compensation expense and a $0.7 million decrease in insurance expense, compared to the same period in 2024.
Previous report
Income tax expense for the three months ended September 30, 2025, was $57.2 million, or an effective rate of (289.0%). The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, the recording of valuation allowances against domestic subsidiaries’ net deferred tax assets, the income earned in foreign jurisdictions with different tax rates than the domestic rate; however, that foreign income is included within U.S. taxable income through Section 951A Global Intangible Low-Taxed Income (“GILTI”) when the foreign rate is less than 90% of the domestic rate, and the impact of worldwide forecast on the interim calculations under ASC 740.
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Comparisons of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024
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Revenue
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Cost of construction
Previous report
Cost of construction for the nine months ended September 30, 2025, was $630.1 million, a decrease of $153.5 million, or 19.6%, compared to the nine months ended September 30, 2024. The decrease was attributable to a $179.0 million decrease in our Transportation segment primarily due to projects approaching completion and impacts related to exiting the M&P business line, offset by a $25.5 million increase in our Civil segment primarily due to new projects substantially started after September 30, 2024.
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Gross profit (loss)
Previous report
Gross profit for the nine months ended September 30, 2025, was $38.1 million, an increase of $108.8 million, or 153.9%, compared to the nine months ended September 30, 2024. The increase was attributable to a $69.8 million improvement in gross profit in our Transportation segment and a $39.0 million increase in gross profit in our Civil segment, both primarily due to the absence of certain prior year net unfavorable adjustments.
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Selling, general, and administrative expenses
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Interest expense
Previous report
Interest expense for the nine months ended September 30, 2025, was $28.0 million, an increase of $8.1 million, or 40.9%, compared to the nine months ended September 30, 2024. The increase was primarily driven by a $1.9 million increase in interest expense related to the real estate transaction described in Note 2 of the unaudited condensed consolidated financial statements, $4.8 million due to the increase of interest rates on external borrowings and $1.4 million due to an increase in amortization of deferred financing costs, compared to the same period in 2024.
Previous report
Income tax expense (benefit)
Previous report
Income tax expense for the nine months ended September 30, 2025, was $56.8 million, or an effective rate of (173.0%). The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, federal tax credits, valuation allowances recorded against domestic subsidiaries’ net deferred tax assets, and income earned in a foreign jurisdiction with different income tax rates from the domestic rate; however, that foreign income is included within U.S. taxable income through GILTI.
Previous report
Comparisons of the Three Months Ended September 30, 2025 to the Three Months Ended September 30, 2024
Previous report
Revenue for the three months ended September 30, 2025, was $99.5 million, an increase of $43.6 million, or 78.1%, compared to the three months ended September 30, 2024. The increase was primarily attributable to increased revenues of $12.5 million from a water pipeline project in the Southwest and $9.0 million from a water facility project in the Pacific Northwest, both of which increased due to the projects being substantially started after September 30, 2024. The increase was also primarily attributable to increased revenues of $11.7 million from a tunnel project in Canada and $7.6 million from a tunnel project in the Southwest, both of which increased dueto the absence of certain prior year net unfavorable adjustments as compared to the same period in 2024.
Previous report
Revenue for the three months ended September 30, 2025, was $113.9 million, a decrease of $3.6 million, or 3.1%, compared to the three months ended September 30, 2024. The decrease was primarily attributable to decreased revenues of $16.8 million from an elevated roadway and bridge project in the Southeast due to the project approaching completion and $14.8 million from a bridge project in the Southeast due to certain net unfavorable adjustments related to project delays. The decreases were offset by increased revenues of $8.4 million from another bridge project in the Southeast, $6.0 million from a bridge project in the Northeast and $5.1 million from a bridge project in the Northwest, due to the projects being substantially started after September 30, 2024. The decreases were also offset by increased revenue of $8.0 million from a bridge project in the Midwest due to the absence of certain prior year net unfavorable adjustments.
Previous report
Gross loss for the three months ended September 30, 2025, was $7.2 million, or (6.3)% of segment revenue, compared to gross loss of $32.8 million, or (27.9)% of segment revenue, for the three months ended September 30, 2024. The primary driver to the decrease in gross loss of $25.6 million was due to an absence of certain prior year net unfavorable adjustments, which led to increases in gross margin contributions of $9.2 million from a M&P project in the South, $3.6 million from a bridge project in the Southeast and $3.5 million from takeover work related to the American Bridge acquisition. Another driver to the decrease in gross loss was the increase in profit contribution of $10.1 million from a bridge project in the Midwest due to prior year net unfavorable adjustments of $17.0 million, compared to current year net unfavorable adjustments of $6.9 million driven by higher-than-expected project costs.
Previous report
Comparisons of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024
Previous report
Revenue for the nine months ended September 30, 2025, was $283.9 million, an increase of $64.4 million, or 29.4%, compared to the nine months ended September 30, 2024. The increase was primarily attributable to increased revenues of $35.1 million from a water pipeline project in the Southwest, $19.6 million from a water facility project in the Pacific Northwest and $13.4 million from a wastewater treatment plant project in the Southwest, all of which increased due to the projects being substantially started after September 30, 2024.
Previous report
Gross profit for the nine months ended September 30, 2025, was $47.7 million, or 16.8% of segment revenue, compared to $8.7 million, or 4.0% of segment revenue, for the nine months ended September 30, 2024. The primary driver to the increase of $39.0 million for the three months ended September 30, 2025 versus the same period in 2024 was primarily due to the absence of certain prior year net unfavorable adjustments, which led to a $28.6 million total increase in gross margin contribution from those related projects. The increase was also attributable to increased gross margin contributions of $6.9 million from a water pipeline project in the Southwest, $6.1 from a tunnel and water pipeline project in the Southwest and $4.3 million from a water facility project in the Pacific Northwest, all of which increased due to the projects being substantially started after September 30, 2024. These increases were offset by decreased gross margin contributions of $3.6 million from a water pipeline project in the Midwest and $3.4 million from a water project in the East, both due to unfavorable adjustments related to claims.
Previous report
Revenue for the nine months ended September 30, 2025, was $384.3 million, a decrease of $109.2 million, or 22.1%, compared to the nine months ended September 30, 2024. The decrease was primarily attributable to decreased revenues of $97.9 million from a project in the Bahamas and $36.4 million from takeover work related to the American Bridge acquisition, due to the projects approaching completion. These decreases were offset by increased revenue of $25.8 million from a bridge project in the Northeast due to the project being substantially started after September 30, 2024.
Previous report
Gross loss for the nine months ended September 30, 2025, was $9.5 million, or (2.5)% of segment revenue, compared to gross loss of $79.4 million, or (16.1)% of segment revenue, for the nine months ended September 30, 2024. The primary driver to the decrease in gross loss of $69.9 million was the increase in profit contribution of $35.9 million from an M&P project in the South due to prior year net unfavorable adjustments of $40.2 million, compared to current year net unfavorable adjustments of $4.4 million due to project delays. Another driver to the decrease in gross loss was the increase in profit contribution of $28.2 million from a bridge project in the Midwest due to prior year net unfavorable adjustments of $42.3 million, compared to current year net unfavorable adjustments of $14.0 million driven by higher-than-expected project costs.
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Civil
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Transportation
Previous report
Subsequent to the year ended December 31, 2024, the Company and Administrative Agent entered into a first amendment to the Credit Facility that removed an Administrative Agent-requested borrowing base reserve amount in exchange for certain additional reporting obligations and a personal guarantee from Frank Renda, the Company’s President and Chief Executive Officer, on any draws made on the Delayed Draw. As such, the Company has access to the Delayed Draw facility as supported by the borrowing base calculation and as of September 30, 2025, $18.7 million was available.
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Revolving Credit Facility
Previous report
In July 2024, the Company made a $3.0 million payment on the Revolving Credit Facility, in connection with the real estate transaction described in Note 2 of the unaudited condensed consolidated financial statements. On August 9, 2024, a principal payment of $2.5 million was made and the Revolving Credit Facility limit was reduced to $84.5 million. An additional payment of $10.0 million was made on September 15, 2024, which further reduced the Revolving Credit Facility limit to $74.5 million. The Company used a portion of the Term Loan proceeds to pay in full outstanding amounts under the Revolving Credit Facility. Concurrently with the Company’s entry into the Credit Agreement, the Company terminated the Revolving Credit Facility.
Reworded paragraphs (23)
Previous wording
Southland Holdings, Inc. (“Southland”) is a diverse leader in specialty infrastructure construction with roots dating back to 1900. The end markets for which we provide services cover a broad spectrum of specialty services within infrastructure construction. We design and construct projects in the bridges, tunnels, communications, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipelines end markets.
Current wording
Southland Holdings, Inc. (“Southland”) is a diverse leader in specialty infrastructure construction with roots dating back to 1900. The end markets for which we provide services cover a broad spectrum of specialty services within infrastructure construction. We design and construct projects in the bridges, tunnels, communications, data centers, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipelines end markets.
Previous wording
Both our Civil and Transportation segments continue to identify new opportunities, and the future outlook of the end markets we serve remains positive. Although risk and uncertainty exist, including, but not limited to, the items addressed within our forward-looking statements and risk factors, we believe that we are well positioned to compete on new infrastructure projects in both the public and private sectors.
Current wording
Both our Civil and Transportation segments continue to identify new opportunities to grow our business, and the future outlook of the end markets we serve remains positive. Although risk and uncertainty exist, including, but not limited to, the items addressed within our forward-looking statements and risk factors, we believe that we are well positioned to compete on new infrastructure projects in both the public and private sectors.
Previous wording
For the three months ended September 30, 2025, M&P contributed $22.9 million to revenue and $3.0 million to gross loss. There is additional information on the M&P gross loss in the Transportation portion of the Segment Results section of this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This compares to $17.5 million to revenue and $18.3 million to gross loss for the three months ended September 30, 2024. For the nine months ended September 30, 2025, M&P contributed $62.7 million to revenue and $15.9 million in gross loss. This compares to $65.0 million to revenue and $75.4 million to gross loss for the nine months ended September 30, 2024. As of September 30, 2025, approximately 3.9% of Southland’s backlog was in M&P and Southland estimates most of this work to be substantially completed in the next three months, with three projects extending into 2026.
Current wording
For the three months ended March 31, 2026, M&P contributed $11.0 million to revenue and $13.1 million to gross loss. There is additional information on the M&P gross loss in the Transportation portion of the Segment Results section of this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This compares to $18.1 million to revenue and $9.1 million to gross loss for the three months ended March 31, 2025. As of March 31, 2026, approximately 3.8% of Southland’s backlog was in M&P and Southland estimates most of this work to be substantially completed in 2026.
Previous wording
Revenue for the nine months ended September 30, 2025, was $668.2 million, a decrease of $44.7 million, or 6.3%, compared to the nine months ended September 30, 2024. The decrease was attributable to a $109.1 million decrease in revenue in our Transportation segment primarily due to projects approaching completion, offset by a $64.4 million increase in revenue in our Civil segment primarily due to new projects substantially started after September 30, 2024.
Current wording
Revenue for the three months ended March 31, 2026, was $172.4 million, a decrease of $67.1 million, or 28.0%, compared to the three months ended March 31, 2025. The decrease was attributable to a $68.0 million decrease in revenue in our Transportation segment primarily due to projects approaching completion, offset by a $0.9 million increase in revenue in our Civil segment primarily due to a new project substantially started after March 31, 2025.
Previous wording
Cost of construction for the three months ended September 30, 2025, was $210.1 million, a decrease of $14.4 million, or 6.4%, compared to the three months ended September 30, 2024. The decrease was attributable to a $29.2 million decrease in our Transportation segment primarily due to projects approaching completion and impacts related to exiting the M&P business line, offset by a $14.8 million increase in our Civil segment primarily due to new projects substantially started after September 30, 2024.
Current wording
Cost of construction for the three months ended March 31, 2026, was $177.2 million, a decrease of $40.8 million, or 18.7%, compared to the three months ended March 31, 2025. The decrease was attributable to a $49.7 million decrease in our Transportation segment primarily due to projects approaching completion, offset by an $8.9 million increase in our Civil segment primarily due to new projects substantially started after March 31, 2025.
Previous wording
Gross profit for the three months ended September 30, 2025, was $3.3 million, an increase of $54.4 million, or 106.4%, compared to the three months ended September 30, 2024. The increase was attributable to a $28.8 million increase in gross profit in our Civil segment and a $25.6 million improvement in gross loss in our Transportation segment, both primarily due to the absence of certain prior year net unfavorable adjustments.
Current wording
Gross loss for the three months ended March 31, 2026, was $4.8 million, a decrease in gross profit of $26.2 million, or 122.1%, compared to the three months ended March 31, 2025. The decrease was attributable to an $18.2 million increase in gross loss in our Transportation segment primarily due to unfavorable adjustments related to unfavorable dispute resolutions and an $8.0 million decrease in gross profit in our Civil segment primarily due to higher-than-expected project costs.
Previous wording
Selling, general, and administrative expenses for the nine months ended September 30, 2025, were $44.6 million, a decrease of $2.9 million, or 6.2%, compared to the nine months ended September 30, 2024. The decrease was primarily due to a $0.9 million decrease in stock compensation, a $0.7 million decrease in legal expense, a $0.6 million decrease in incentive compensation expense and a $0.6 million decrease in professional fees, compared to the same period in 2024.
Current wording
Selling, general, and administrative expenses for the three months ended March 31, 2026, were $14.9 million, a decrease of $1.5 million, or 9.2%, compared to the three months ended March 31, 2025. The decrease was primarily due to a $2.4 million decrease in compensation expense, a $0.6 million decrease in professional fees and a $0.5 million decrease in real estate and personal property taxes, offset by a $2.1 million increase in business transformation expenses, compared to the same period in 2025.
Previous wording
Interest expense for the three months ended September 30, 2025, was $9.2 million, an increase of $1.6 million, or 21.9%, compared to the three months ended September 30, 2024. The increase was primarily driven by a $0.5 million increase in amortization of deferred financing costs and $1.1 million due to the increase of interest rates on external borrowings, compared to the same period in 2024.
Current wording
Interest expense for the three months ended March 31, 2026, was $8.7 million, a decrease of $0.2 million, or 2.2%, compared to the three months ended March 31, 2025. The decrease was primarily driven by the decrease of total debt compared to the same period in 2025.
Previous wording
The Company is in a net deferred tax asset position for both U.S. federal and state income tax as of September 30, 2025. The Company assesses available positive and negative evidence to estimate whether sufficient taxable income will be generated to permit use of existing deferred income tax assets. The Company has incurred three years of cumulative losses in various jurisdictions including the U.S. Such objective evidence and recent changes in forecasts resulted in the Company establishing a valuation allowance against the net deferred tax assets related to U.S. federal and state income tax as of September 30, 2025, with the exception of the net deferred tax assets related to separate state filings for certain subsidiaries. As of September 30, 2025, the Company has recorded a valuation allowance of approximately $62.5 million related to its US federal and state net deferred tax assets, inclusive of current year activity, as they are determined to be more-likely-than-not to not be utilized.
Current wording
The Company is in a net deferred tax asset position for both U.S. federal and state income tax as of March 31, 2026. The Company assesses available positive and negative evidence to estimate whether sufficient taxable income will be generated to permit use of existing deferred income tax assets. The Company has incurred three years of cumulative losses in various jurisdictions including the U.S. Such objective evidence and recent changes in forecasts resulted in the Company establishing a valuation allowance against the net deferred tax assets related to U.S. federal and state income tax as of September 30, 2025, with the exception of the net deferred tax assets related to separate state filings for certain subsidiaries. As of March 31, 2026, the Company has recorded a valuation allowance of approximately $123.8 million, inclusive of current year, related to its US federal and state net deferred tax assets, inclusive of current year activity, as they are determined to be more-likely-than-not to not be utilized
Previous wording
Income tax benefit for the three months ended September 30, 2024, was $17.1 million, or an effective rate of 22.9%. The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, the recording of a valuation allowance against certain subsidiaries’ net deferred tax assets, federal tax credits, the income earned in foreign jurisdictions with a zero tax rate; however, that foreign income is included within U.S. taxable income through GILTI, and the impact of worldwide forecast on the interim calculations under ASC 740.
Current wording
Income tax benefit for the three months ended March 31, 2025, had an effective rate of 10.1%. The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, the recording of a valuation allowance against certain subsidiaries’ net deferred tax assets, federal tax credits, the income earned in foreign jurisdictions with a zero tax rate; however, that foreign income is included within U.S. taxable income through global intangible low taxed income (“GILTI”), and the impact of worldwide forecast on the interim calculations under ASC 740.
Previous wording
Gross profit for the three months ended September 30, 2025, was $10.4 million, or 10.5% of segment revenue, compared to gross loss of $18.3 million, or (32.8)%, of segment revenue, for the three months ended September 30, 2024. The primary driver to the increase in gross profit of $28.8 million for the three months ended September 30, 2025 versus the same period in 2024 was primarily due to the absence of certain prior year net unfavorable adjustments, which led to a $25.1 million total increase in gross margin contribution from those related projects. The increase was also attributable to increased gross margin contributions of $2.4 million from a water pipeline project in the Southwest, $2.1 from a wastewater treatment plant project in Canada, $2.0 million from a water facility project in the Pacific Northwest, $1.8 million from a tunnel project in the Southwest and $1.2 million from a wastewater treatment plant project in the Southwest, all of which increased due to the projects being substantially started after September 30, 2024. These increases were offset by decreased gross margin contributions of $4.0 million from a water pipeline project in the Midwest and $3.5 million from a water project in the East, both due to unfavorable adjustments related to claims.
Current wording
Gross profit for the three months ended March 31, 2026, was $14.7 million, or 14.1% of segment revenue, compared to gross profit of $22.6 million, or 22.0%, of segment revenue, for the three months ended March 31, 2025. The primary driver to the decrease in gross profit of $8.0 million for the three months ended March 31, 2026 versus the same period in 2025 was primarily due to decreases in gross profit contributions of $3.1 million from a water facility project in the Northwest, $2.9 million from a water pipeline project in the Southwest and $2.7 million from a water treatment plant project in the Southwest, all of which decreased due to higher-than-expected project costs.
Previous wording
Our principal sources of liquidity are cash generated from operations, funds from borrowings, and existing cash on hand. Our principal uses of cash typically include the funding of working capital obligations, debt service, and investment in machinery and equipment for our projects.
Current wording
Our principal sources of liquidity are cash generated from operations, funds from borrowings, including amounts funded to support projects under certain GIAs, and existing cash on hand. Our principal uses of cash typically include the funding of working capital obligations, debt service, and investment in machinery and equipment for our projects.
Previous wording
We will receive the proceeds from the exercise of Warrants for cash. We believe the likelihood that Warrant holders will exercise their Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock. On November 3, 2025, the closing price of our common stock was $4.52 per share. To the extent the market price of our common stock remains below the exercise price of $11.50 per share, we believe that Warrant holders will be unlikely to exercise their Warrants for cash, resulting in little or no cash proceeds to us for any such exercise. To the extent we receive any cash proceeds, we expect to use such proceeds for general corporate and working capital purposes, which would increase our liquidity. However, we do not expect to rely materially on the cash exercise of Warrants to fund our operations.
Current wording
We will receive the proceeds from the exercise of Warrants for cash. We believe the likelihood that Warrant holders will exercise their Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock. On May 1, 2026, the closing price of our common stock was $1.18 per share. To the extent the market price of our common stock remains below the exercise price of $11.50 per share, we believe that Warrant holders will be unlikely to exercise their Warrants for cash, resulting in little or no cash proceeds to us for any such exercise. To the extent we receive any cash proceeds, we expect to use such proceeds for general corporate and working capital purposes, which would increase our liquidity. However, we do not expect to rely materially on the cash exercise of Warrants to fund our operations.
Previous wording
Our current and future liquidity is greatly dependent upon our operating results, which are largely determined by overall economic conditions, our current contracts and Backlog. Our liquidity could be adversely affected by a disruption in the availability of credit. If such an event were to occur, we may be unable to borrow under our Credit Facility (as defined below) or may be required to seek additional financing. In addition, we may be required to seek additional financing to refinance all or a significant portion of our existing debt on or prior to maturity. We may also seek to access the public or private equity markets to support our liquidity whenever required or conditions are favorable to us. We have filed a shelf registration statement on Form S-3 with the SEC that was declared effective by the SEC on April 8, 2024 (File No. 333-278008), which allows us to offer and sell up to an aggregate amount of $150.0 million of any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or units of these securities from time to time subject to Instruction I.B.6 to Form S-3 which limits the aggregate market value of securities we may sell during any 12 consecutive months to one-third of our public float for so long as our public float is less than $75.0 million. There can be no assurance that we will be able to raise additional capital or obtain additional financing when needed or on terms that are favorable to us.
Current wording
Our current and future liquidity is greatly dependent upon our operating results, which are largely determined by overall economic conditions, our current contracts and Backlog. Our liquidity could be adversely affected by a disruption in the availability of credit. If such an event were to occur, we may be required to seek additional financing. In addition, we may be required to seek additional financing to refinance all or a significant portion of our existing debt on or prior to maturity. We may also seek to access the public or private equity markets to support our liquidity whenever required or conditions are favorable to us. We have filed a shelf registration statement on Form S-3 with the SEC that was declared effective by the SEC on April 8, 2024 (File No. 333-278008), which allows us to offer and sell up to an aggregate amount of $150.0 million of any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or units of these securities from time to time subject to Instruction I.B.6 to Form S-3 which limits the aggregate market value of securities we may sell during any 12 consecutive months to one-third of our public float for so long as our public float is less than $75.0 million. There can be no assurance that we will be able to raise additional capital or obtain additional financing when needed or on terms that are favorable to us.
Previous wording
The following table sets forth summary change in cash, cash equivalent and restricted cash for the nine months ended September 30, 2025 and 2024:
Current wording
The following table sets forth summary change in cash, cash equivalent and restricted cash for the three months ended March 31, 2026 and 2025:
Previous wording
Net cash provided by operating activities was $6.9 million during the nine months ended September 30, 2025. During the nine months ended September 30, 2025, the primary drivers in cash provided by operating activities were $57.2 million in deferred taxes, an increase of $28.2 million in accounts payable and accrued liabilities, an increase of $18.5 in contract liabilities and $17.5 million in depreciation and amortization, offset by $89.7 million in net loss and an increase of $23.1 million accounts receivable. Net cash provided by operating activities was $12.2 million during the nine months ended September 30, 2024. During the nine months ended September 30, 2024, the primary drivers in cash provided by operating activities were a decrease of $97.8 million in contract assets, an increase of $50.1 million in contract liabilities, $16.9 million in depreciation and amortization and $1.2 million increase in operating lease liabilities, offset by $105.1 million in net loss, $26.7 million in deferred taxes, and a decrease of $22.1 million in accounts payable and accrued liabilities.
Current wording
Net cash used in operating activities was $133.9 million during the three months ended March 31, 2026. During the three months ended March 31, 2026, the primary drivers in cash used in operating activities were a decrease of $104.1 million in accounts payable, retainage payable and accrued liabilities and $28.2 million in net loss. Net cash provided by operating activities was $6.4 million during the three months ended March 31, 2025. During the three months ended March 31, 2025, the primary drivers in cash provided by operating activities were an increase of $10.4 million in accounts payable and accrued liabilities, a decrease of $8.6 million in accounts receivable, and an increase of $6.9 million in contract liabilities, offset by an increase of $10.7 million in contract assets and an increase of $7.5 million in other current assets.
Previous wording
Net cash provided by investing activities was $3.1 million during the nine months ended September 30, 2025. During the nine months ended September 30, 2025, the primary drivers in cash provided by investing activities were $6.3 million in proceeds from sale of property and equipment, offset by $3.4 million in purchases of property and equipment. Net cash provided by investing activities was $2.3 million during the nine months ended September 30, 2024. During the nine months ended September 30, 2024, the primary drivers in cash provided by investing activities were $4.5 million in proceeds from sale of property and equipment and $4.2 million in distributions from investees, offset by $6.2 million in purchases of property and equipment.
Current wording
Net cash provided by investing activities was $1.3 million during the three months ended March 31, 2026. During the three months ended March 31, 2026, the primary drivers in cash provided by investing activities were $1.0 million in proceeds from sale of property and equipment and by $0.3 million in distributions from other investments. Net cash provided by investing activities was $1.1 million during the three months ended March 31, 2025. During the three months ended March 31, 2025, the primary drivers in cash provided by investing activities were $2.9 million in proceeds from sale of property and equipment offset by $1.8 million in purchases of property and equipment.
Previous wording
Net cash used in financing activities was $40.3 million for the nine months ended September 30, 2025. During the nine months ended September 30, 2025, the primary drivers in cash used in financing activities were $39.0 million in payments on notes payable and $0.8 million in payments of finance lease and financing obligations. Net cash provided by financing activities was $28.4 million for the nine months ended September 30, 2024. During the nine months ended September 30, 2024, the primary drivers in cash provided by financing activities were $167.8 million in borrowings on notes payable and $42.5 million in proceeds from financing obligations, offset by $95.0 million of payments on the Revolving Credit Facility (as defined below), $80.6 million in payments on notes payable and $5.5 million in payments of deferred financing costs.
Current wording
Net cash provided by financing activities was $97.0 million for the three months ended March 31, 2026. During the three months ended March 31, 2026, the primary drivers in cash provided by financing activities were $125.1 million in proceeds from advancement of surety funds, offset by $27.4 million in payments on notes payable. Net cash used in financing activities was $14.0 million for the three months ended March 31, 2025. During the three months ended March 31, 2025, the primary drivers in cash used in financing activities were $13.6 million in payments on notes payable and $0.3 million in payments of finance lease and financing obligations.
Previous wording
As of September 30, 2025, we had total debt of $267.8 million, of which $51.4 million is due within the next twelve months.
Current wording
As of March 31, 2026, we had total debt of $230.8 million, of which $56.1 million is due within the next twelve months.
Previous wording
On September 30, 2024, the Company entered into a term loan and security agreement (the “Credit Agreement”) with Callodine Commercial Finance, LLC as administrative agent and lender. The Credit Agreement provides for a four-year secured $160.0 million term loan facility (the “Credit Facility”), consisting of a $140.0 million initial draw term loan (the “Term Loan”) and a $20.0 million committed delayed draw term loan (the “Delayed Draw”). The Delayed Draw is a committed facility in which the Company may request all or a portion of the Delayed Draw to be available to the Company, subject to specified advance rates against eligible collateral and other criteria of the Credit Facility. The Delayed Draw can be drawn no more than once per quarter in minimum increments of $2.5 million, and once drawn, any repaid amounts of the Delayed Draw cannot be re-borrowed. Any undrawn portion of the Delayed Draw commitment will terminate on September 30, 2027, the third anniversary of the closing date. The Credit Facility has a maturity date of September 30, 2028.
Current wording
On September 30, 2024, the Company entered into a term loan and security agreement (the “Credit Agreement”) with Callodine Commercial Finance, LLC as administrative agent and lender. The Credit Agreement provides for a four-year secured $160.0 million term loan facility (the “Credit Facility”), consisting of a $140.0 million initial draw term loan (the “Term Loan”).
Previous wording
The Credit Agreement requires quarterly principal payments on the Term Loan, which commenced on December 31, 2024. The required principal amortization is as follows: (i) 5.0% in the first year (1.25% per quarter), (ii) 10.0% in the second year (2.50% per quarter), (iii) 15.0% in the third and fourth years (3.75% per quarter), and (iv) the remaining balance at maturity. The amortization for the Delayed Draw will also be paid quarterly and apply to each individual draw at the same prevailing quarterly rate that is in effect for the Term Loan and will commence with the first full quarter after the draw date of any Delayed Draw.
Current wording
The Credit Agreement requires quarterly principal payments on the Term Loan, which commenced on December 31, 2024. The required principal amortization is as follows: (i) 5.0% in the first year (1.25% per quarter), (ii) 10.0% in the second year (2.50% per quarter), (iii) 15.0% in the third and fourth years (3.75% per quarter), and (iv) the remaining balance at maturity.
Previous wording
The interest on amounts drawn under the Credit Facility is payable monthly at a rate of 7.25% per annum plus the higher of (i) 90-day Secured Overnight Financing Rate (“SOFR”) with a credit adjustment spread of 0.15% or (ii) 3%. The undrawn portion of the Delayed Draw is subject to a 3.75% commitment fee, payable monthly.
Current wording
The interest on amounts drawn under the Credit Facility is payable monthly at a rate of 7.25% per annum plus the higher of (i) 90-day Secured Overnight Financing Rate (“SOFR”) with a credit adjustment spread of 0.15% or (ii) 3%.
Previous wording
As of September 30, 2025, the Company was in compliance with all applicable covenants under the Credit Agreement.
Current wording
As of March 31, 2026, the Company was in compliance with all applicable covenants under the Credit Agreement, as amended, and after giving effect to the waiver granted by the sureties.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
The following table sets forth summary financial information for the nine months ended September 30, 2025 and 2024:
Previous report — wording carried elsewhere
The Company is in a net deferred tax asset position for both U.S. federal and state income tax as of September 30, 2025. The Company assesses available positive and negative evidence to estimate whether sufficient taxable income will be generated to permit use of existing deferred income tax assets. The Company has incurred three years of cumulative losses in various jurisdictions including the U.S. Such objective evidence and recent changes in forecasts resulted in the Company establishing a valuation allowance against the net deferred tax assets related to U.S. federal and state income tax as of September 30, 2025, with the exception of the net deferred tax assets related to separate state filings for certain subsidiaries. As of September 30, 2025, the Company has recorded a valuation allowance of approximately $62.5 million related to its US federal and state net deferred tax assets, inclusive of current year activity, as they are determined to be more-likely-than-not to not be utilized.
Previous report — wording carried elsewhere
Income tax benefit for the nine months ended September 30, 2024, was $32.8 million, or an effective rate of 24.2%. The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, federal tax credits, the income earned in foreign jurisdictions with a zero tax rate; however, that foreign income is included within U.S. taxable income through GILTI, and the recording of a valuation allowance against certain subsidiaries’ net deferred tax assets.
Previous report — wording carried elsewhere
The following table sets forth segment information for the nine months ended September 30, 2025 and 2024: