Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

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.

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

Overview

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.

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. With the combined capabilities of these six primary subsidiaries, Southland has become a diversified industry leader with projects spanning North America in various end markets.

Key Factors Affecting Results of Operations

Business Environment

We segregate our business into two reportable segments: Transportation and Civil. Our Civil segment primarily operates throughout North America and specializes in services that include the design and construction of water pipeline, pump stations, lift stations, water and wastewater treatment plants, concrete and structural steel, outfall, and tunneling.

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

Both our Civil and Transportation segments continue to identify new opportunities, 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.

Market Trends and Uncertainties

In both our Transportation and Civil segments, we have competitors within the individual markets and geographic areas in which we operate, ranging from small, local companies to larger regional, national, and international companies. Although the construction business is highly competitive, there are few, if any, companies which compete in all of our 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.

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

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

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

During the first half of 2025, the U.S. government announced a variety of tariff actions in response to which many countries have announced retaliatory trade actions, including tariffs on U.S. exports. The tariffs and retaliatory trade actions have increased the cost of importing certain construction materials into the U.S. and have caused disruption and uncertainty to both international trade, supply chains and financial markets. It is unclear to what extent, when and for how long announced trade actions will be in place. To date, these trade actions have had no meaningful impact on the results of our operations or the projects currently underway as the construction materials and equipment used for our current projects have generally been sourced and/or secured upon project inception. However, we are evaluating the potential impacts of these proposed tariffs, including potential impacts to our customers, as well as our ability to mitigate their related impacts. In addition, economic experts and policy makers have expressed concerns that increased tariffs and retaliatory trade actions could increase inflation or the risk of a recession, which could also affect our customers' use of capital and demand for our services.

Seasonality, Cyclicality, and Variability

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

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

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with the United States Generally Accepted Accounting Principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses earned and incurred, respectively, during the reporting period. Critical accounting estimates are fundamental to the portrayal of both our financial condition and results of operations and often require difficult, subjective, and complex estimates and judgments 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. 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 financial statements in future periods. The following discussion addresses the items we have identified as our critical accounting estimates. There have been no material developments or changes from the policies and estimates discussed in our annual disclosures.

More information about our accounting policies can be found in Note 2 of our audited consolidated financial statements, and Management's Discussion and Analysis, for the year ended December 31, 2024 on our Annual Report on Form 10-K, as filed with the SEC on March 4, 2025.

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Materials and Paving

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

For the three months ended June 30, 2025, M&P contributed $21.7 million to revenue and $3.8 million in 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 $8.9 million to revenue and $46.8 million to gross loss for the three months ended June 30, 2024. For the six months ended June 30, 2025, M&P contributed $39.8 million to revenue and $12.9 million in gross loss. This compares to $47.5 million to revenue and $57.1 million to gross loss for the six months ended June 30, 2024. As of June 30, 2025, approximately 4.3% of Southland's backlog was in M&P and Southland estimates most of this work to be substantially completed in the next six months, with three projects extending into 2026.

Results of Operations

Comparisons of the Three Months Ended June 30, 2025 to the Three Months Ended June 30, 2024

The following table sets forth summary financial information for the three months ended June 30, 2025 and 2024:

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Revenue

Revenue for the three months ended June 30, 2025, was $215.4 million, a decrease of $36.1 million, or 14.4%, compared to the three months ended June 30, 2024. The decrease was attributable to a $38.3 million decrease in revenue in our Transportation segment primarily due to projects approaching completion, offset by a $2.2 million increase in revenue in our Civil segment primarily due to new projects substantially started after June 30, 2024.

Cost of construction

Cost of construction for the three months ended June 30, 2025, was $202.0 million, a decrease of $89.5 million, or 30.7%, compared to the three months ended June 30, 2024. The decrease was attributable to a $86.2 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 $3.3 million increase in our Civil segment primarily due to new projects substantially started after June 30, 2024.

Gross profit (loss)

Gross profit for the three months ended June 30, 2025, was $13.4 million, an improvement of $53.4 million, or 133.4%, compared to the three months ended June 30, 2024. The increase was attributable to a $47.9 million improvement in gross profit in our Transportation segment and a $5.4 million increase in gross profit in our Civil segment, both primarily due to the absence of certain prior year net unfavorable adjustments.

Selling, general, and administrative expenses

Selling, general, and administrative expenses for the three months ended June 30, 2025, were $13.6 million, a decrease of $2.1 million, or 13.4%, compared to the three months ended June 30, 2024. The decrease was primarily due to a $2.2 million decrease in preconstruction expenses, compared to the same period in 2024.

Interest expense

Interest expense for the three months ended June 30, 2025, was $10.0 million, an increase of $3.3 million, or 48.6%, compared to the three months ended June 30, 2024. The increase was primarily driven by a $1.0 million increase in interest expense related to the real estate transaction described in Note 2 of the unaudited condensed consolidated financial statements, $1.4 million due to the increase of interest rates on external borrowings and $0.9 million due to an increase in amortization of deferred financing costs, compared to the same period in 2024.

Income tax benefit

Income tax benefit for the three months ended June 30, 2025, was $0.1 million, or an effective rate of 0.6%. 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 certain subsidiaries' separate company deferred tax assets, federal tax credits, 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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Income tax benefit for the three months ended June 30, 2024, was $16.0 million, or an effective rate of 26.0%. 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' 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.

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Comparisons of the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024

The following table sets forth summary financial information for the six months ended June 30, 2025 and 2024:

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Revenue

Revenue for the six months ended June 30, 2025, was $454.9 million, a decrease of $84.7 million, or 15.7%, compared to the six months ended June 30, 2024. The decrease was attributable to a $105.5 million decrease in revenue in our Transportation segment primarily due to projects approaching completion, offset by a $20.8 million increase in revenue in our Civil segment primarily due to new projects substantially started after June 30, 2024.

Cost of construction

Cost of construction for the six months ended June 30, 2025, was $420.0 million, a decrease of $139.2 million, or 24.9%, compared to the six months ended June 30, 2024. The decrease was attributable to a $149.8 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 $10.6 million increase in our Civil segment primarily due to new projects substantially started after June 30, 2024.

Gross profit (loss)

Gross profit for the six months ended June 30, 2025, was $34.8 million, an improvement of $54.4 million, or 277.8%, compared to the six months ended June 30, 2024. The increase was attributable to a $44.2 million improvement in gross profit in our Transportation segment and a $10.2 million increase in gross profit in our Civil segment, both primarily due to the absence of certain prior year net unfavorable adjustments.

Selling, general, and administrative expenses

Selling, general, and administrative expenses for the six months ended June 30, 2025, were $30.0 million, a decrease of $0.1 million, or 0.1%, compared to the six months ended June 30, 2024.

Interest expense

Interest expense for the six months ended June 30, 2025, was $18.9 million, an increase of $6.5 million, or 52.4%, compared to the six months ended June 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, $3.7 million due to the increase of interest rates on external borrowings and $0.9 million due to an increase in amortization of deferred financing costs, compared to the same period in 2024.

Income tax benefit

Income tax benefit for the six months ended June 30, 2025, was $0.4 million, or an effective rate of 2.9%. 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 certain 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.

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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 certain subsidiaries' deferred tax assets.

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Segment Results

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Comparisons of the Three Months Ended June 30, 2025 to the Three Months Ended June 30, 2024

The following table sets forth segment information for the three months ended June 30, 2025 and 2024:

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Civil

Revenue for the three months ended June 30, 2025, was $81.5 million, an increase of $2.2 million, or 2.7%, compared to the three months ended June 30, 2024. The increase was primarily attributable to increased revenues of $13.4 million from a water pipeline project in the Southwest, $4.9 million from a tunnel and water pipeline project in the Southwest and $4.5 million from a water facility project in the Pacific Northwest, all of which increased due to the projects being substantially started after June 30, 2024. These increases were offset by decreased revenues of $12.8 million from a wastewater treatment plant project in the Southeast due to certain unfavorable adjustments and $7.3 million from a water project in the West that is approaching completion.

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Gross profit for the three months ended June 30, 2025, was $14.6 million, or 17.9% of segment revenue, compared to gross profit of $9.2 million, or 11.5%, of segment revenue, for the three months ended June 30, 2024. The primary drivers to the increase in gross profit of $5.4 million for the three months ended June 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 $5.2 million increase in gross margin contribution from a tunnel project in Canada.

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Transportation

Revenue for the three months ended June 30, 2025, was $133.9 million, a decrease of $38.3 million, or 22.2%, compared to the three months ended June 30, 2024. The decrease was primarily attributable to decreased revenues of $33.8 million from a project in the Bahamas and $18.6 million from an elevated roadway and bridge project in the Southeast due to both projects approaching completion. These decreases were offset by increased revenue of $10.2 from another project in the Bahamas due to the project being substantially started after June 30, 2024.

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Gross loss for the three months ended June 30, 2025, was $1.2 million, or (0.9)% of segment revenue, compared to gross loss of $49.2 million, or (28.6)% of segment revenue, for the three months ended June 30, 2024. The primary driver to the decrease in gross loss of $47.9 million was due to an absence of certain prior year net unfavorable adjustments in the M&P business line of $45.6 million. 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 $17.2 million, compared to current year net unfavorable adjustments of $7.1 million. These decreases in gross loss were offset by an increase in gross loss of $7.4 million from an elevated roadway and bridge project in the Southeast due to project delays.

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Comparisons of the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024

The following table sets forth segment information for the six months ended June 30, 2025 and 2024:

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Civil

Revenue for the six months ended June 30, 2025, was $184.4 million, an increase of $20.8 million, or 12.7%, compared to the six months ended June 30, 2024. The increase was primarily attributable to increased revenues of $22.6 million from a water pipeline project in the Southwest and $10.6 million from a water facility project in the Pacific Northwest, both of which increased due to the projects being substantially started after June 30, 2024. These increases were offset by decreased revenue of $13.5 million from a water pipeline project in the Southwest that is approaching completion.

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Gross profit for the six months ended June 30, 2025, was $37.2 million, or 20.2% of segment revenue, compared to $27.0 million, or 16.5% of segment revenue, for the six months ended June 30, 2024. The primary drivers to the increase of $10.2 million were increased profit contribution of $5.2 million from a tunnel project in Canada due to an absence of certain prior year net unfavorable adjustments and $4.5million from a water project in the Southwest with a higher margin substantially started after June 30, 2024.

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Transportation

Revenue for the six months ended June 30, 2025, was $270.4 million, a decrease of $105.5 million, or 28.1%, compared to the six months ended June 30, 2024. This was primarily attributable to decreased revenues of $92.4 million from a project in the Bahamas and $36.9 from takeover work related to the American Bridge acquisition, due to the projects approaching completion. These decreases were offset by increased revenue of $21.5 million from another project in the Bahamas due to the project substantially started after June 30, 2024.

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Gross loss for the six months ended June 30, 2025, was $2.4 million, or (0.9)% of segment revenue, compared to gross loss of $46.6 million, or (12.4)% of segment revenue, for the six months ended June 30, 2024. The primary driver to the decrease in gross loss of $49.2 million was due to an absence of certain prior year net unfavorable adjustments in the M&P business line of $45.6 million. Another driver to the decrease in gross loss was the increase in profit contribution of $18.1 million from a bridge project in the Midwest due to prior year net unfavorable adjustments of $25.2 million, compared to current year net unfavorable adjustments of $7.1 million. These increases in profitability were offset by a decrease in gross margin contribution of $16.5 million from a project in the Bahamas that is approaching completion.

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Key Business Metrics

Non-GAAP Financial Measures

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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, forecasting and compensation 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.

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EBITDA

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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.

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Non-GAAP financial measures 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 non-GAAP financial measures on a supplemental basis. The reconciliation of net loss to non-GAAP financial measures 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 these non-GAAP financial measures.

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Backlog

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

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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 termination, 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 termination 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.

The following tables set forth our Backlog by segment:

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Civil

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Transportation

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Liquidity, Capital Commitments and Resources

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

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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 August 1, 2025, the closing price of our common stock was $3.90 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.

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Based on historical and anticipated future operating results, we believe cash flow from operations, available cash, and other financing sources 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.

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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.

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

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The following table sets forth summary change in cash, cash equivalent and restricted cash for the six months ended June 30, 2025 and 2024:

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Net cash provided by operating activities was $1.0 million during the six months ended June 30, 2025. During the six months ended June 30, 2025, the primary drivers in cash provided by operating activities were a decrease of $19.5 million in accounts receivable, $12.8 million in depreciation and amortization of deferred financing costs and an increase of $12.3 million in accounts payable and accrued liabilities, offset by an increase of $16.9 million in contract assets, $12.7 million in net loss, an increase of $10.4 million in other current assets and a decrease of $4.7 million in operating lease liabilities. Net cash provided by operating activities was $17.5 million during the six months ended June 30, 2024. During the six months ended June 30, 2024, the primary drivers in cash provided by operating activities were an increase of $77.2 million in accounts payable and accrued liabilities, an increase of $31.9 million in contract liabilities, a decrease of $27.4 million in contract assets and $11.1 million in depreciation and amortization, offset by an increase of $64.7 million in accounts receivables, $44.8 million in net loss, $15.9 million in deferred taxes and $3.2 million in earnings from equity method investments.

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Net cash provided by investing activities was $0.8 million during the six months ended June 30, 2025. During the six months ended June 30, 2025, the primary drivers in cash provided by investing activities were $3.4 million in proceeds from sale of property and equipment, offset by $2.9 million in purchases of property and equipment. 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.

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Net cash used in financing activities was $26.1 million for the six months ended June 30, 2025. During the six months ended June 30, 2025, the primary drivers in cash used in financing activities were $25.2 million in payments on notes payable and $0.5 million in payments of finance lease and financing obligations. 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.

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As of June 30, 2025, we had total debt of $278.6 million, of which $48.9 million is due within the next twelve months.

SecuredNotes

We enter into secured notes in order to finance growth within our business. As of June 30, 2025, we had outstanding secured notes expiring between December 2025 and March 2033. Interest rates on the secured notes range between 0.00% and 12.90%. The secured notes are collateralized by certain assets of Southland's fleet of equipment.

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.

The Credit Facility replaced the revolving credit facility with Frost Bank that was originally entered into in July 2021 (as subsequently amended, the "Revolving Credit Facility"). A portion of the proceeds from the Term Loan was used to pay in full all outstanding amounts under the Revolving Credit Facility, and the Revolving Credit Facility was terminated.

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 June 30, 2025, $17.3 million was available.

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.

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.

Any principal prepayments in the first three years, other than mandatory prepayments pursuant to the Credit Agreement, will be subject to additional fees. In the first year, any prepayments will incur fees of 3% or the make-whole premium, whichever is higher. The make-whole premium is the interest and fees that would have been earned for the full year less interest and fees paid to date during the year. In the second and third years, any prepayments will incur fees of 2% and 1%, respectively. There are no fees for prepayments made in the fourth year.

The Credit Agreement contains customary restrictive covenants and events of default, including financial covenants based on the Company's Liquidity, as defined in the Credit Agreement, and trailing twelve-month earnings before interest expense, income taxes, depreciation and amortization (the "TTM EBITDA Covenants"). The TTM EBITDA Covenants will be tested and the Company must comply with the TTM EBITDA Covenants during any period where the Company's Liquidity falls below $30.0 million until the Company's Liquidity exceeds $30.0 million for a period of at least 30 days. The Credit Agreement requires the Company to maintain Liquidity of at least $20.0 million at all times. The Credit Agreement also stipulates that the outstanding principal cannot be greater than the specified advance rates against eligible collateral.

The obligations under the Credit Facility are unconditionally guaranteed by the Company and its subsidiaries. The obligations under the Credit Facility are secured by a first lien on all assets of the Company, subject to permitted liens and interests of other parties as described in the Credit Agreement.

As of June 30, 2025, the Company was in compliance with all applicable covenants under the Credit Agreement.

Mortgage Notes

We enter into mortgage notes in order to finance growth within our business. As of June 30, 2025, we had a mortgage note expiring in February 2029. The interest rate on the mortgage note was 5.99%. The mortgage note is collateralized by certain real estate owned by Southland.

Revolving Credit Facility

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.

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