Limbach Holdings, Inc. (Nasdaq: LMB) ("Limbach" or the "Company") today announced its financial results for the quarter ended March 31, 2024.
2024 First Quarter Financial Overview Compared to 2023 First Quarter
Management Comments
"I am pleased with our performance in the first quarter. We advanced our strategy of becoming a partner to building owners with mission critical building systems by accelerating our shift to ODR through acquisitions and organic growth. As a result, we are increasing Adjusted EBITDA guidance for the year," said Michael McCann, Limbach's President and Chief Executive Officer. "At the end of Q1, ODR revenue was 62.4% of total revenue, up from 55.1% at the end of Q4. With this increase in our higher margin ODR business, we are now projecting $51 million to $55 million in Adjusted EBITDA for the year compared to our previous $49 million to $53 million guidance, and our annual goal for ODR revenue as a percentage of consolidated revenue has increased from a range of 60% - 70% to a revised range of 65% - 70%. With this mix shift, we expect to see full-year Adjusted EBITDA Margin in the range of 9.6% to 10.8% for 2024 based on full-year total revenue in the range of $510 million to $530 million. Shifting our segment mix from General Contractor Relationships ("GCR") to ODR is a key pillar of our growth strategy to create a stronger, more durable Limbach, and our strategy is working.
"Gross margins and Adjusted EBITDA margins have steadily increased with the increase in ODR revenue since we began executing our strategy. As we have moved away from bigger, lower margin GCR projects, consolidated revenue has declined by design. This is an intentional sacrifice of topline growth to increase bottom line profit. Once we reach an optimized segment mix, we will expect to see the growth of the ODR business strategy reflected in topline revenue growth.
"Although the first quarter is typically the softest of the year due to weather and the seasonality of customer budgets, we are off to a strong start as business began gaining momentum in March. Our team is executing well, and their strong performance is driving the growth of the ODR business. We are adding sales resources and training as planned investments as we focus on the ODR sales model, which has been a transition for the overall business and requires more customer interaction and selling activities. These investments are paying off as we generate more frequent, more profitable transactions.
"Our strategy to grow the ODR business has plenty of runway. We strongly believe we have only scratched the surface with respect to customer relationships and market penetration. I am confident in Limbach's ability to continue to grow its ODR business, and in our team's ability to perform at a high level. We will continue to be disciplined with our engagement of new business. Our balance sheet remains strong, and we will judiciously make investments that support our strategy. Executing our strategy is how we drive higher returns and create meaningful value for our stockholders."
The following are results for the three months ended March 31, 2024 compared to the three months ended March 31, 2023:
Balance Sheet
At March 31, 2024, cash and cash equivalents were $48.2 million. Current assets were $199.4 million and current liabilities were $124.4 million at March 31, 2024, representing a current ratio of 1.60x compared to 1.50x at December 31, 2023. Working capital was $75.0 million at March 31, 2024, an increase of $3.2 million from December 31, 2023. At March 31, 2024, we had $10.0 million in borrowings against our revolving credit facility and $5.2 million for standby letters of credit.
2024 Guidance
We are updating our guidance for FY 2024 as follows:
|
Current |
|
Previous |
Revenue |
$510 million - $530 million(1) |
|
$510 million - $530 million |
Adjusted EBITDA |
$51 million - $55 million |
|
$49 million - $53 million |
(1) |
No change from the previous |
With respect to projected 2024 Adjusted EBITDA guidance and Adjusted EBITDA Margin, a quantitative reconciliation is not available without unreasonable efforts due to the high variability, complexity and low visibility with respect to certain items, which are excluded from Adjusted EBITDA. We expect the variability of these items to have a potentially unpredictable, and potentially significant, impact on future financial results.
Conference Call Details
Date: |
Thursday, May 9, 2024 |
Time: |
9:00 a.m. Eastern Time |
Participant Dial-In Numbers: |
|
Domestic callers: |
(877) 407-6176 |
International callers: |
(201) 689-8451 |
Access by Webcast
The call will also be simultaneously webcast over the Internet via the "Investor Relations" section of Limbach's website at www.limbachinc.com or by clicking on the conference call link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=BmWmfvNA. An audio replay of the call will be archived on Limbach's website for 365 days.
About Limbach
Limbach is a building systems solution firm that partners with building owners and facilities managers who have mission critical mechanical (heating, ventilation and air conditioning), electrical and plumbing infrastructure. We strive to be an indispensable partner to our customers by providing services that are essential to the operation of their businesses. We work with building owners primarily in six vertical markets: healthcare, industrial and manufacturing, data centers, life science, higher education, and cultural and entertainment. We have more than 1,300 team members in 19 offices across the eastern United States. Our team members uniquely combine engineering expertise with field installation skills to provide custom solutions that leverage our full life-cycle capabilities, which allows us to address both the operational and capital projects needs of our customers.
Additional Information
Investors and others should note that Limbach announces material financial information to its investors using its investor relations website, U.S. Securities and Exchange Commission filings, press releases, public conference calls/videos, and webcasts. Limbach uses these channels, as well as social media, to communicate with our stockholders and the public about the Company, the Company's services and other Company information. It is possible that the information that Limbach posts on social media could be deemed to be material information. Therefore, Limbach encourages investors, the media, and others interested in the Company to review the information posted on the social media channels listed on Limbach's investor relations website.
Forward-Looking Statements
We make forward-looking statements in this press release within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts for future events, including, without limitation, our earnings, Adjusted EBITDA, revenues, expenses, backlog, capital expenditures or other future financial or business performance or strategies, results of operations or financial condition, and in particular statements regarding the impact of the COVID-19 pandemic on the construction industry in future periods, timing of the recognition of backlog as revenue, the potential for recovery of cost overruns, and the ability of Limbach to successfully remedy the issues that have led to write-downs in various business units. These statements may be preceded by, followed by or include the words "may," "might," "will," "will likely result," "should," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "continue," "target," "goal," or similar expressions. These forward-looking statements are based on information available to us as of the date they were made and involve a number of risks and uncertainties, which may cause them to turn out to be wrong. Some of these risks and uncertainties may in the future be amplified by the COVID-19 outbreak and there may be additional risks that we consider immaterial or which are unknown. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Please refer to our most recent annual report on Form 10-K, as well as our subsequent filings on Form 10-Q and Form 8-K, which are available on the SEC's website (www.sec.gov), for a full discussion of the risks and other factors that may impact any forward-looking statements in this press release.
LIMBACH HOLDINGS, INC. Condensed Consolidated Statements of Operations (Unaudited) |
||||||||
|
|
Three Months Ended March 31, |
||||||
(in thousands, except share and per share data) |
|
|
2024 |
|
|
|
2023 |
|
Revenue |
|
$ |
118,976 |
|
|
$ |
121,009 |
|
Cost of revenue |
|
|
87,888 |
|
|
|
94,782 |
|
Gross profit |
|
|
31,088 |
|
|
|
26,227 |
|
Operating expenses: |
|
|
|
|
||||
Selling, general and administrative |
|
|
22,876 |
|
|
|
21,050 |
|
Change in fair value of contingent consideration |
|
|
623 |
|
|
|
141 |
|
Amortization of intangibles |
|
|
1,057 |
|
|
|
383 |
|
Total operating expenses |
|
|
24,556 |
|
|
|
21,574 |
|
Operating income |
|
|
6,532 |
|
|
|
4,653 |
|
Other income (expenses): |
|
|
|
|
||||
Interest expense |
|
|
(475 |
) |
|
|
(667 |
) |
Interest income |
|
|
562 |
|
|
|
? |
|
Gain (loss) on disposition of property and equipment |
|
|
491 |
|
|
|
(215 |
) |
Gain (loss) on change in fair value of interest rate swap |
|
|
149 |
|
|
|
(156 |
) |
Total other income (expenses) |
|
|
727 |
|
|
|
(1,038 |
) |
Income before income taxes |
|
|
7,259 |
|
|
|
3,615 |
|
Income tax (benefit) provision |
|
|
(327 |
) |
|
|
622 |
|
Net income |
|
$ |
7,586 |
|
|
$ |
2,993 |
|
|
|
|
|
|
||||
Earnings Per Share ("EPS") |
|
|
|
|
||||
Earnings per common share: |
|
|
|
|
||||
Basic |
|
$ |
0.68 |
|
|
$ |
0.29 |
|
Diluted |
|
$ |
0.64 |
|
|
$ |
0.27 |
|
Weighted average number of shares outstanding: |
|
|
|
|
||||
Basic |
|
|
11,159,849 |
|
|
|
10,475,364 |
|
Diluted |
|
|
11,894,747 |
|
|
|
11,040,063 |
|
LIMBACH HOLDINGS, INC. Condensed Consolidated Balance Sheets (Unaudited) |
|||||||
(in thousands, except share and per share data) |
March 31, 2024 |
|
December 31, 2023 |
||||
ASSETS |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
48,239 |
|
|
$ |
59,833 |
|
Restricted cash |
|
65 |
|
|
|
65 |
|
Accounts receivable (net of allowance for credit losses of $330 and $292 as of March 31, 2024 and December 31, 2023, respectively) |
|
95,855 |
|
|
|
97,755 |
|
Contract assets |
|
47,096 |
|
|
|
51,690 |
|
Other current assets |
|
8,164 |
|
|
|
7,657 |
|
Total current assets |
|
199,419 |
|
|
|
217,000 |
|
|
|
|
|
||||
Property and equipment, net |
|
22,634 |
|
|
|
20,830 |
|
Intangible assets, net |
|
23,972 |
|
|
|
24,999 |
|
Goodwill |
|
16,433 |
|
|
|
16,374 |
|
Operating lease right-of-use assets |
|
20,749 |
|
|
|
19,727 |
|
Deferred tax asset |
|
5,505 |
|
|
|
5,179 |
|
Other assets |
|
472 |
|
|
|
330 |
|
Total assets |
$ |
289,184 |
|
|
$ |
304,439 |
|
|
|
|
|
||||
LIABILITIES |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Current portion of long-term debt |
$ |
2,532 |
|
|
$ |
2,680 |
|
Current operating lease liabilities |
|
3,678 |
|
|
|
3,627 |
|
Accounts payable, including retainage |
|
51,910 |
|
|
|
65,268 |
|
Contract liabilities |
|
41,107 |
|
|
|
42,160 |
|
Accrued income taxes |
|
446 |
|
|
|
446 |
|
Accrued expenses and other current liabilities |
|
24,720 |
|
|
|
30,967 |
|
Total current liabilities |
|
124,393 |
|
|
|
145,148 |
|
Long-term debt |
|
19,353 |
|
|
|
19,631 |
|
Long-term operating lease liabilities |
|
17,109 |
|
|
|
16,037 |
|
Other long-term liabilities |
|
2,801 |
|
|
|
2,708 |
|
Total liabilities |
|
163,656 |
|
|
|
183,524 |
|
|
|
|
|
||||
STOCKHOLDERS' EQUITY |
|
|
|
||||
Common stock, $0.0001 par value; 100,000,000 shares authorized, issued 11,447,738 and 11,183,076, respectively, and 11,268,086 and 11,003,424 outstanding, respectively |
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
89,555 |
|
|
|
92,528 |
|
Treasury stock, at cost (179,652 shares at both period ends) |
|
(2,000 |
) |
|
|
(2,000 |
) |
Retained earnings |
|
37,972 |
|
|
|
30,386 |
|
Total stockholders' equity |
|
125,528 |
|
|
|
120,915 |
|
Total liabilities and stockholders' equity |
$ |
289,184 |
|
|
$ |
304,439 |
|
LIMBACH HOLDINGS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||||||
|
Three Months Ended March 31, |
||||||
(in thousands) |
|
2024 |
|
|
|
2023 |
|
Cash flows from operating activities: |
|
|
|
||||
Net income |
$ |
7,586 |
|
|
$ |
2,993 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
||||
Depreciation and amortization |
|
2,712 |
|
|
|
1,922 |
|
Provision for credit losses |
|
39 |
|
|
|
52 |
|
Stock-based compensation expense |
|
1,249 |
|
|
|
1,133 |
|
Noncash operating lease expense |
|
1,045 |
|
|
|
976 |
|
Amortization of debt issuance costs |
|
11 |
|
|
|
38 |
|
Deferred income tax provision |
|
(327 |
) |
|
|
(63 |
) |
(Gain) loss on sale of property and equipment |
|
(491 |
) |
|
|
215 |
|
Loss on change in fair value of contingent consideration |
|
623 |
|
|
|
141 |
|
(Gain) loss on change in fair value of interest rate swap |
|
(149 |
) |
|
|
156 |
|
Changes in operating assets and liabilities: |
|
|
|
||||
Accounts receivable |
|
1,861 |
|
|
|
24,581 |
|
Contract assets |
|
4,594 |
|
|
|
(2,737 |
) |
Other current assets |
|
(592 |
) |
|
|
(2,743 |
) |
Accounts payable, including retainage |
|
(14,060 |
) |
|
|
(14,929 |
) |
Prepaid income taxes |
|
? |
|
|
|
(44 |
) |
Accrued taxes payable |
|
? |
|
|
|
686 |
|
Contract liabilities |
|
(1,052 |
) |
|
|
868 |
|
Operating lease liabilities |
|
(974 |
) |
|
|
(934 |
) |
Accrued expenses and other current liabilities |
|
(5,863 |
) |
|
|
(3,170 |
) |
Other long-term liabilities |
|
(156 |
) |
|
|
225 |
|
Net cash (used in) provided by operating activities |
|
(3,944 |
) |
|
|
9,366 |
|
Cash flows from investing activities: |
|
|
|
||||
Proceeds from sale of property and equipment |
|
561 |
|
|
|
101 |
|
Advances from joint ventures |
|
4 |
|
|
|
? |
|
Purchase of property and equipment |
|
(2,541 |
) |
|
|
(923 |
) |
Net cash used in investing activities |
|
(1,976 |
) |
|
|
(822 |
) |
Cash flows from financing activities: |
|
|
|
||||
Payments on A&R Wintrust Term Loans |
|
? |
|
|
|
(1,857 |
) |
Payments on finance leases |
|
(693 |
) |
|
|
(639 |
) |
Taxes paid related to net-share settlement of equity awards |
|
(5,187 |
) |
|
|
(847 |
) |
Proceeds from contributions to Employee Stock Purchase Plan |
|
206 |
|
|
|
174 |
|
Net cash used in financing activities |
|
(5,674 |
) |
|
|
(3,169 |
) |
(Decrease) increase in cash, cash equivalents and restricted cash |
|
(11,594 |
) |
|
|
5,375 |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
59,898 |
|
|
|
36,114 |
|
Cash, cash equivalents and restricted cash, end of period |
$ |
48,304 |
|
|
$ |
41,489 |
|
Supplemental disclosures of cash flow information |
|
|
|
||||
Noncash investing and financing transactions: |
|
|
|
||||
Right of use assets obtained in exchange for new operating lease liabilities |
$ |
2,097 |
|
|
$ |
742 |
|
Right of use assets obtained in exchange for new finance lease liabilities |
|
308 |
|
|
|
1,402 |
|
Right of use assets disposed or adjusted modifying finance lease liabilities |
|
(41 |
) |
|
|
(1 |
) |
Interest paid |
|
484 |
|
|
|
657 |
|
Cash paid for income taxes |
$ |
? |
|
|
$ |
44 |
|
LIMBACH HOLDINGS, INC. Condensed Consolidated Segment Operating Results (Unaudited) |
||||||||||||||||||
|
Three Months Ended March 31, |
|
Increase/(Decrease) |
|||||||||||||||
(in thousands, except for percentages) |
2024 |
|
2023 |
|
$ |
|
% |
|||||||||||
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|||||||
ODR |
$ |
74,256 |
|
62.4 |
% |
|
$ |
58,718 |
|
48.5 |
% |
|
$ |
15,538 |
|
|
26.5 |
% |
GCR |
|
44,720 |
|
37.6 |
% |
|
|
62,291 |
|
51.5 |
% |
|
|
(17,571 |
) |
|
(28.2 |
)% |
Total revenue |
|
118,976 |
|
100.0 |
% |
|
|
121,009 |
|
100.0 |
% |
|
|
(2,033 |
) |
|
(1.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|||||||
ODR(1) |
|
22,161 |
|
29.8 |
% |
|
|
15,909 |
|
27.1 |
% |
|
|
6,252 |
|
|
39.3 |
% |
GCR(2) |
|
8,927 |
|
20.0 |
% |
|
|
10,318 |
|
16.6 |
% |
|
|
(1,391 |
) |
|
(13.5 |
)% |
Total gross profit |
|
31,088 |
|
26.1 |
% |
|
|
26,227 |
|
21.7 |
% |
|
|
4,861 |
|
|
18.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Selling, general and administrative(3) |
|
22,876 |
|
19.2 |
% |
|
|
21,050 |
|
17.4 |
% |
|
|
1,826 |
|
|
8.7 |
% |
Change in fair value of contingent consideration |
|
623 |
|
0.5 |
% |
|
|
141 |
|
0.1 |
% |
|
|
482 |
|
|
341.8 |
% |
Amortization of intangibles |
|
1,057 |
|
0.9 |
% |
|
|
383 |
|
0.3 |
% |
|
|
674 |
|
|
176.0 |
% |
Total operating income |
$ |
6,532 |
|
5.5 |
% |
|
$ |
4,653 |
|
3.8 |
% |
|
$ |
1,879 |
|
|
40.4 |
% |
(1) |
As a percentage of OCR revenue. |
|
(2) |
As a percentage of GCR revenue. |
|
(3) |
Included within selling, general and administrative expenses was $1.2 million and $1.1 million of stock based compensation expense for the three months ended March 31, 2024 and 2023, respectively. |
Non-GAAP Financial Measures
In assessing the performance of our business, management utilizes a variety of financial and performance measures. The key measures are Adjusted EBITDA and Adjusted EBITDA Margin, which are non-GAAP financial measures. We define Adjusted EBITDA as net income plus depreciation and amortization expense, interest expense, and taxes, as further adjusted to eliminate the impact of, when applicable, other non-cash items or expenses that are unusual or non-recurring that we believe do not reflect our core operating results. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total consolidated revenue. We believe that Adjusted EBITDA and Adjusted EBITDA Margin are meaningful to our investors to enhance their understanding of our financial performance for the current period and our ability to generate cash flows from operations that are available for taxes, capital expenditures and debt service. We understand that these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties as a measure of financial performance and to compare our performance with the performance of other companies that report Adjusted EBITDA and Adjusted EBITDA Margin. Our calculation of Adjusted EBITDA and Adjusted EBITDA Margin, however, may not be comparable to similarly titled measures reported by other companies. When assessing our operating performance, investors and others should not consider this data in isolation or as a substitute for net income calculated in accordance with GAAP. Further, the results presented by Adjusted EBITDA and Adjusted EBITDA Margin cannot be achieved without incurring the costs that the measure excludes. A reconciliation of net income to Adjusted EBITDA, the most comparable GAAP measure, is provided below.
We refer to our estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue we have recognized under such contracts, as "backlog." Backlog includes unexercised contract options.
Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDA Margin |
|
|
|||||
|
|
|
|
||||
|
Three Months Ended March 31, |
||||||
(in thousands) |
|
2024 |
|
|
|
2023 |
|
Net income |
$ |
7,586 |
|
|
$ |
2,993 |
|
|
|
|
|
||||
Adjustments: |
|
|
|
||||
Depreciation and amortization |
|
2,712 |
|
|
|
1,922 |
|
Interest expense |
|
475 |
|
|
|
667 |
|
Interest income |
|
(562 |
) |
|
|
? |
|
Non-cash stock-based compensation expense |
|
1,249 |
|
|
|
1,133 |
|
Change in fair value of interest rate swap |
|
(149 |
) |
|
|
156 |
|
CEO transition costs |
|
? |
|
|
|
811 |
|
Income tax (benefit) provision |
|
(327 |
) |
|
|
622 |
|
Acquisition and other transaction costs |
|
30 |
|
|
|
? |
|
Change in fair value of contingent consideration |
|
623 |
|
|
|
141 |
|
Restructuring costs(1) |
|
120 |
|
|
|
240 |
|
Adjusted EBITDA |
$ |
11,757 |
|
|
$ |
8,685 |
|
|
|
|
|
||||
Revenue |
$ |
118,976 |
|
|
$ |
121,009 |
|
Adjusted EBITDA Margin |
|
9.9 |
% |
|
|
7.2 |
% |
(1) |
For the three months ended March 31, 2024 and 2023, the majority of the restructuring costs related to our Southern California and Eastern Pennsylvania branches. |
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