LEGATO(LGTO) - 2024 Q4 - Annual Report

Financial Performance - The company recognized contract revenue of $1,150,716,000 in 2023, with a projection of$980,179,000 for 2024[46]. - Revenue for the year ended December 31, 2024, was $980.2 million, a decrease of$180.2 million, or 15.5%, compared to 2023[211]. - Cost of construction for the year ended December 31, 2024, was $1,043.2 million, a decrease of$81.4 million, or 7.2%, compared to 2023[212]. - Gross loss for the year ended December 31, 2024, was $63.0 million, an increase of$98.9 million, or 276.0%, compared to 2023[213]. - Selling, general, and administrative costs for the year ended December 31, 2024, were $63.3 million, a decrease of$3.9 million, or 5.8%, compared to 2023[214]. - Other income, net for the year ended December 31, 2024, was $3.6 million, a decrease of$19.9 million, or 84.6%, compared to 2023[215]. - Interest expense for the year ended December 31, 2024, was $29.5 million, an increase of$10.0 million, or 51.6%, compared to 2023[216]. - Income tax benefit for the year ended December 31, 2024, was $46.9 million, with an effective tax rate of 30.8$323.3 million, a decrease of $14.2 million, or 4.2$16.7 million, or 5.2% of segment revenue, compared to $51.7 million, or 15.3$656.9 million, a decrease of $166.0 million compared to 2023[211]. Operational Challenges - Southland's operations are impacted by supply chain disruptions, particularly in the prices of oil, gas, and construction materials[48]. - Labor costs have increased due to inflation and shortages, making hiring and retaining skilled workers a priority[50]. - The company is exposed to risks related to government contracts, including potential penalties for late completion and the impact of budgetary changes on demand for services[83]. - The company’s backlog is subject to unexpected adjustments and cancellations, which could materially affect revenue and profits[81]. - The company may face significant adverse effects if it loses business from key customers, particularly government entities[82]. - Revenue is significantly influenced by project-based work awarded through competitive bidding, making it difficult to predict project timing and geographic distribution[87]. - Economic conditions, including recessions and low oil prices, can adversely affect customer budgets for capital expenditures, impacting demand for services[88]. - A substantial portion of revenue is generated from construction projects, which are subject to cyclical fluctuations due to economic downturns and material shortages[89]. - Adverse credit market conditions could impair the company's and its customers' borrowing capacity, negatively affecting operations and project execution[90]. - The company is exposed to risks of delays and cost overruns in complex projects, which could lead to reduced profits or losses[91]. - Supply chain disruptions may negatively impact the ability to complete projects, affecting overall operational efficiency[98]. - Weather conditions can significantly affect revenue and profitability, causing project delays and additional costs[100]. - Climate change-related events pose long-term risks that could disrupt operations and increase costs for both the company and its customers[101]. - Labor shortages in skilled personnel may increase operating costs and impair the company's ability to maintain productivity and support growth[102]. - The company operates in high-risk locations, incurring substantial security costs to maintain safety, which is critical to its reputation and performance[106]. Compliance and Regulatory Risks - The company is subject to various procurement regulations, including the Davis-Bacon Act and the Walsh-Healy Act, which may impose additional costs on operations[62]. - The company is committed to compliance with the Foreign Corrupt Practices Act, which prohibits improper payments to foreign officials[63]. - The company faces risks related to compliance with regulations, which could lead to termination of government contracts and adversely affect financial position and cash flows[86]. - Changes in laws and regulations may increase compliance costs and risks, potentially leading to fines and operational limitations[113]. - Violations of anti-bribery laws could result in significant penalties and damage to reputation, adversely affecting business operations[115]. - The company may face material lawsuits or claims that could divert management attention and adversely affect cash flows and reputation[116]. Cybersecurity and Technology - The company's cybersecurity program is governed by the IT Director, who has 20 years of experience and is a Certified Secure Infrastructure Specialist[177]. - The company maintains cybersecurity risk insurance and conducts regular vulnerability audits, reporting results to senior management[176]. - The company employs a Risk Assessment Score based on NIST standards to manage cybersecurity risks across all platforms[173]. - Cybersecurity risks, including data breaches, could lead to significant operational disruptions and financial losses[117]. Strategic Focus and Future Outlook - In Q2 2023, Southland discontinued certain projects in its Materials & Paving business line, focusing on more profitable areas[26]. - The company has identified a positive future outlook for its Civil and Transportation segments, with ongoing identification of new opportunities for growth[193]. - The company anticipates increased demand for specialty construction projects due to federal, state, and local infrastructure spending initiatives[196]. - The company emphasizes selective bidding on projects that align with profitability objectives and market opportunities[35]. - The company aims for a mix of large-scale and small-scale projects to mitigate risks associated with specific customers or projects[35]. Workforce and Employment - As of December 31, 2024, the company had approximately 2,100 employees, with 500 salaried and 1,600 hourly[65]. - Approximately 14% of the workforce, or about 300 employees, were represented by a union as of December 31, 2024[66]. - The company emphasizes a diverse and inclusive workplace, with policies against discrimination based on various protected classes[67]. - The company has a commitment to workplace safety, tracking key safety metrics that are reviewed monthly by senior management[70]. - The company provides competitive compensation and benefits packages, including a 401(k) match plan and healthcare benefits[72]. Financial Structure and Market Risks - The company does not intend to pay dividends for the foreseeable future, relying solely on appreciation in the value of its securities for returns[161]. - The company may issue additional equity securities in the future, which could dilute earnings per share and stockholders' percentage ownership[171]. - The company is classified as a "controlled company," which may allow it to take advantage of exemptions from certain corporate governance requirements under NYSE rules[162]. - The trading price of the company's securities is likely to be volatile, influenced by various factors including market conditions and operational performance[153]. - If the company's securities are delisted from NYSE, they may be quoted on an over-the-counter market, leading to reduced liquidity and increased volatility[151]. - Future sales or perceived future sales by the company or stockholders could cause the market price of its securities to decline[157]. - The company's actual operating and financial results may differ from guidance provided to the public, potentially affecting trading prices[160]. - The Initial Stockholders and Southland Members are not subject to contractual restrictions regarding the transfer of their shares, which could impact the market price of the company's Common Stock[158].