Financial Performance - Revenue for the year ended December 31, 2023, was 1.0 million, or 0.1%, compared to 2022, primarily due to a 1,160.4 million, a slight decrease from 35.8 million, a significant decrease from (31.4) million, compared to an operating income of (19.3) million, compared to net income of 67.2 million, an increase of 19.5 million, an increase of 23.6 million, an increase of 8.5 million, with an effective rate of 31.3%[217]. - Gross profit for the year ended December 31, 2023, was 105.1 million, or 74.6%, compared to 2022[207]. Project and Contract Management - As of December 31, 2023, Southland's contract backlog stands at 2,973,885,000 in 2022[45]. - The gross backlog for Southland as of December 31, 2023, was 1,011,797,000[45]. - Approximately 8.5% of Southland's backlog as of December 31, 2023, was in the Materials & Paving segment, which is expected to be substantially completed in the next 18 months[200]. - The company’s backlog is subject to unexpected adjustments and cancellations, which could materially affect revenue and profits[82]. Operational Challenges - The company has faced increased project costs due to supply chain disruptions and rising prices of oil, gas, and construction materials[47]. - The construction industry has experienced widespread supply chain impacts due to COVID-19 and geopolitical events, affecting labor costs and availability[49]. - Weather conditions can significantly impact revenue and profitability, causing project delays and additional costs[99]. - Climate change-related events pose long-term risks to the company's operations, potentially leading to increased costs and project cancellations[100]. - Labor shortages in skilled positions may increase operating costs and hinder the company's ability to maintain productivity and profitability[102]. - Supply chain interruptions may negatively affect the company's ability to complete projects, as sourcing materials from suppliers can be disrupted[97]. - The company faces risks associated with project delays and cost overruns, which may not be recoverable and could materially impact profits[91]. Workforce and Employment - As of December 31, 2023, the company had approximately 2,500 employees, with 600 salaried and 1,900 hourly[64]. - About 20% of the workforce, or approximately 500 employees, were represented by a union[65]. - The company emphasizes a diverse and inclusive workplace, with policies against discrimination based on various factors[67]. - The company has a commitment to workplace safety, tracking key safety metrics that are reviewed monthly by senior management[69]. - The company offers a competitive compensation and benefits package, including a 401(k) Match Plan and healthcare benefits[71]. Regulatory and Compliance Risks - The company is subject to various regulations, including the Foreign Corrupt Practices Act, which could expose it to significant penalties for non-compliance[62]. - Changes in laws and regulations may increase compliance costs and could adversely affect business operations and financial results[110]. - Violations of anti-bribery laws could result in significant penalties and damage to reputation, impacting business operations[111]. - The company may face material lawsuits or claims that could divert management attention and adversely affect cash flows[112]. Market and Economic Conditions - The company is vulnerable to cyclical market conditions, with demand for services affected by economic factors such as recessions, low oil prices, and political uncertainties[88]. - Economic downturns can lead to delays or cancellations of construction projects, adversely impacting revenue and profit generation[89]. - Adverse credit and financial market conditions may impair the company's and its customers' borrowing capacity, potentially leading to contract cancellations and project delays[90]. - A substantial portion of the company's revenue is derived from project-based work, making it difficult to predict project timing and geographic distribution, which can lead to cash flow unpredictability[87]. Strategic Focus and Business Model - Southland's business model emphasizes self-performance, allowing better cost management and minimizing reliance on third-party providers[34]. - The company targets a mix of large-scale and small-scale projects to mitigate risks associated with specific customers or projects[34]. - Southland maintains a strong balance sheet and bonding capacity, enabling it to target large contract work and limit competition[34]. Cybersecurity and Technology - The company employs risk management strategies based on NIST standards to mitigate cybersecurity risks[164]. - The cybersecurity operations are overseen by the IT Director, who has 20 years of experience and communicates regularly with the CFO[168]. - The company maintains cybersecurity risk insurance and conducts regular vulnerability audits[167]. Financial Strategy and Shareholder Returns - The company does not intend to pay dividends for the foreseeable future, relying on stock appreciation for returns[79]. - The company has not paid any cash dividends on its Common Stock to date and does not anticipate doing so in the foreseeable future[177]. - The company is classified as an "emerging growth company," which may affect the attractiveness of its common stock to investors due to reduced disclosure requirements[139]. - The company may face delisting from NYSE, which could limit trading and subject it to additional restrictions[142]. - If delisted, the company's securities may only be quoted on an over-the-counter market, leading to significant adverse consequences[143]. - The trading price of the company's securities is likely to be volatile, influenced by market conditions rather than operational performance[144]. - The company is classified as a "controlled company," which may allow it to take advantage of exemptions from certain corporate governance requirements[155].
LEGATO(LGTO) - 2023 Q4 - Annual Report