Southland Holdings Inc

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

Our Civil segment currently 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.

Previous wording

Our Transportation segment operates throughout North America and specializes in services that include the design and construction of bridges, roadways, marine, dredging, ship terminals and piers, and specialty structures and facilities. Our Transportation segment is responsible for the construction of bridges and structures including many of the most recognizable bridges, convention centers, sports stadiums, marine facilities, and ferris wheels in the world.

Current wording

Our Transportation segment currently operates throughout North America and specializes in services that include the design and construction of bridges, roadways, marine, dredging, ship terminals and piers, and specialty structures and facilities. Our Transportation segment is responsible for the construction of bridges and structures including many of the most recognizable bridges, convention centers, sports stadiums, marine facilities, and ferris wheels in the world.

Previous 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. We believe that we have the operational excellence, reputation, and technical skill to continue to grow our business.

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 exists, 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.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

In the second quarter of 2023, Southland decided to discontinue certain types of projects in its Materials & Paving business line (“M&P”) and sold assets related to producing large scale concrete and asphalt. M&P is reported in the Transportation segment. In an effort to wind down this component of its Transportation segment and reallocate resources towards core operations, the Company sold various materials production assets. The Company has concluded this action with M&P does not qualify for Discontinued Operations treatment and presentation under ASC 205-20 as it does not represent a strategic shift in the Company’s business.

Previous wording

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

Current wording

Cost of construction for the three months ended June 30, 2024, was $291.5 million, an increase of $0.8 million, or 0.3%, compared to the three months ended June 30, 2023. The increase was primarily attributable to a $10.5 million increase in our Civil segment offset by a $9.7 million decrease in our Transportation segment.

Previous wording

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

Current wording

Selling, general, and administrative expenses for the three months ended June 30, 2024, were $15.7 million, a decrease of $0.8 million, or 4.7%, compared to the three months ended June 30, 2023. The decrease was primarily due to a reduction of bad debt expense compared to the same period in 2023.

Previous wording

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

Current wording

Interest expense for the three months ended June 30, 2024, was $6.7 million, an increase of $2.4 million, or 56.1%, compared to the three months ended June 30, 2023. The difference is primarily driven by an increase in external borrowings compared to the prior year and higher interest rates on additional borrowings.

Previous wording

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

Current wording

Income tax benefit for the three months ended June 30, 2023, was $18.6 million, or an effective rate of 61.0%. The difference from the federal statutory tax rate of 21% was driven by the change in the U.S. consolidated filing structure as a result of the Merger, permanent book and tax differences related to earnouts, and elections made by various subsidiaries to voluntarily revoke their S-corporation status effective January 1, 2023.

Previous wording

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

Current wording

Revenue for the six months ended June 30, 2024, was $539.6 million, an increase of $7.9 million, or 1.5%, compared to the six months ended June 30, 2023. The increase was primarily attributable to a $25.1 million increase of revenue in our Civil segment offset by a $17.2 million decrease in revenue in our Transportation segment.

Previous wording

Income tax expense for the three months ended March 31, 2024, was $0.3 million, or an effective rate of 36.9%. The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, federal tax credits, the income earned in foreign jurisdictions with a zero tax rate; however that foreign income is included

Current wording

Income tax benefit for the six months ended June 30, 2024, was $15.7 million, or an effective rate of 25.9%. The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, federal tax credits, the income earned in foreign jurisdictions with a zero tax rate; however that foreign income is included within U.S. taxable income through GILTI, and the recording of a valuation allowance against Johnson Bros. Corporation’s deferred tax assets.

Previous wording

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

Current wording

Revenue for the three months ended June 30, 2024, was $79.4 million, an increase of $13.8 million, or 21.0%, compared to the three months ended June 30, 2023. This was primarily attributable to increased revenues of $6.7 million from a water project in North Dakota, $6.0 million from a water project in the Southwest, and $4.7 million from a water project in Texas, for the three months ended June 30, 2024 versus the same period in 2023. These increases were partially offset by decreased revenue of $4.4 million from a tunnel project in Texas for the three months ended June 30, 2024 versus the same period in 2023.

Previous wording

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

Current wording

Gross profit for the three months ended June 30, 2024, was $9.2 million, or 11.5% of segment revenue, compared to $5.9 million, or 9.0%, of segment revenue, for the three months ended June 30, 2023. The primary drivers to the increase of $3.3 million were increased profit contribution of $2.2 million from a water project in Texas and $1.7 million from a water project in North Dakota, for the three months ended June 30, 2024 versus the same period in 2023.

Previous wording

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

Current wording

Gross loss for the six months ended June 30, 2024, was $46.6 million, or (12.4)% of segment revenue, compared to gross loss of $29.5 million, or (7.5)% of segment revenue, for the six months ended June 30, 2023. The primary contributions to the increase of gross loss of $17.1 million was a decrease in profitability of $10.5 million from a bridge project in the Midwest and $9.1 million from a street maintenance project in Texas, for the six months ended June 30, 2024 versus the same period in 2023. This decrease was partially offset by an increase in profitability of $2.6 million from a water project in Kentucky, for the six months ended June 30, 2024 versus the same period in 2023.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

In our industry, it is customary to manage our business using earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”). EBITDA assists management and the Board of Directors and may be useful to investors in comparing our operating performance consistently over time as it removes the impact of our capital structure and expenses that do not relate to our core operations. Our computation of EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate EBITDA in the same fashion.

Previous wording

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

Current wording

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA on a supplemental basis. The reconciliation of net loss to EBITDA and Adjusted EBITDA below

Previous wording

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

Current wording

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

Previous wording

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

Current wording

We will receive cash proceeds from the exercise of any Warrants that are exercised on a cash basis. 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 August 5, 2024, the closing price of our common stock was $3.33 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 and our current contracts and Backlog. Our liquidity could be adversely affected by a disruption in the availability of credit. If such a material adverse event were to occur, we may be unable to borrow under our revolving credit facility agreement or may be required to seek additional financing. In addition, we may be required to seek additional financing to refinance all or a significant portion of our existing debt on or prior to maturity. We may also seek to access the public or private equity markets to support our liquidity whenever required or conditions are favorable to us. We have filed a shelf registration statement on Form S-3 with the SEC that was declared effective by the SEC on April 8, 2024 (File No. 333-278008), which allows us to offer and sell up to an aggregate amount of $150.0 million of any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or units of these securities from time to time. There can be no assurance that we will be able to raise additional capital or obtain additional financing when needed or on terms that are favorable to us.

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 a material adverse event were to occur, we may be unable to borrow under our revolving credit facility agreement or may be required to seek additional financing. In addition, we may be required to seek additional financing to refinance all or a significant portion of our existing debt on or prior to maturity. We may also seek to access the public or private equity markets to support our liquidity whenever required or conditions are favorable to us. We have filed a shelf registration statement on Form S-3 with the SEC that was declared effective by the SEC on April 8, 2024 (File No. 333-278008), which allows us to offer and sell up to an aggregate amount of $150.0 million of any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or units of these securities from time to time 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 three months ended March 31, 2024 and 2023:

Current wording

The following table sets forth summary change in cash, cash equivalent and restricted cash for the six months ended June 30, 2024 and 2023:

Previous wording

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

Current wording

Net cash provided by investing activities was $3.0 million during the six months ended June 30, 2024. During the six months ended June 30, 2024, the primary drivers in cash provided by investing activities were proceeds from sale of property and equipment of $3.2 million and distributions from investees of $4.2 million, offset by purchases of property and equipment of $4.2 million. Net cash provided by investing activities was $2.2 million during the six months ended June 30, 2023. During the six months ended June 30, 2023, the primary drivers in cash provided by investing activities were proceeds from sale of property and equipment of $7.2 million, which was partially offset by purchases of property and equipment of $5.0 million.

Previous wording

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

Current wording

Net cash used in financing activities was $15.1 million for the six months ended June 30, 2024. During the six months ended June 30, 2024, the primary drivers in cash used in financing activities were $36.9 million of payments on notes payable and $2.7 million of payments on finance leases, offset by $24.7 million of borrowings on notes payable. Net cash used in financing activities was $9.7 million for the six months ended June 30, 2023. During the six months ended June 30, 2023, the primary drivers in cash used in financing activities were $27.7 million of payments on notes payable that were offset by $17.1 million of proceeds from the Merger and $3.0 million in borrowings on a line of credit.

Previous wording

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

Current wording

As of June 30, 2024, we had total long-term debt of $307.8 million, of which $134.5 million is due within the next twelve months. In February 2024, May 2024 and August 2024, the Company amended the revolving credit facility to restructure certain covenant levels. We are currently in compliance with all applicable debt covenants, as amended or waived.

Previous wording

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

Current wording

In July 2021, we entered into a revolving credit facility agreement with Frost Bank for $50.0 million. As of December 31, 2022, the revolving credit facility agreement had been amended and increased to $100.0 million. In August 2023, therevolving credit facilitywas extended through January 15, 2025 and we incurred $0.3 million in deferred financing costs. The revolving credit facility agreement bears interest on drawn balances at 1-month SOFR, subject to a floor of 0.90%, plus an applicable margin rate of 3.00%. The waiver in May 2024 amended the revolving credit facility limit to $95.0 million, a $5.0 million cash collateral deposit, or debt paydown and extended maturity to April 15, 2025. As of June 30, 2024, $90.0 million was drawn on the revolving credit facility. The Company made an additional $3.0 million payment on the revolving credit facility subsequent to June 30, 2024, in connection with a real estate transaction (see Note 15).

Previous wording

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

Current wording

We enter into secured notes in order to finance growth within our business. In July 2023, we refinanced approximately $76.4 million of existing secured notes in exchange for a new equipment note in the amount of $113.5 million. The new equipment note is secured by specific construction equipment assets and has a five-year fully amortizing term at a fixed rate of 7.25%. We incurred $0.3 million as deferred financing cost and $0.6 million as bank service charges in connection with the refinancing. The deferred financing costs are included in long-term debt on our consolidated balance sheets. Additionally, as part of the refinancing, we incurred a loss on extinguishment of debt of $0.6 million, which was included in other income, net on our consolidated statements of operations. As of June 30, 2024, we had outstanding secured notes expiring between December 2025