Le Lézard
Classified in: Business
Subjects: EARNINGS, Conference Call, Webcast

Limbach Holdings Reports Second Quarter 2019 Results


Limbach Holdings, Inc. (NASDAQ:LMB) ("Limbach" or the "Company") today announced financial results for the quarter ended June 30, 2019. Total Q2 2019 revenues were $132.8 million as planned activity reduction in one geographic region (each a "Business Unit") offset solid growth across others. Q2 2019 Gross Margins were up from the prior year at 13.1%, versus 11.3%. Year to date Operating Income was $4.0 million compared to an operating loss of $0.9 million last year for the same period.

Other key highlights of the quarter included (unless noted, all financial comparisons are to the prior-year quarter):

Management Commentary

Charlie Bacon, CEO of Limbach, commented, "Our second quarter featured good news on multiple fronts ? proposal activity and sales in our key end market verticals continue to be very good; gross margin was up nicely from last year's second quarter; and our Mid-Atlantic region continues to perform well, with a second profitable quarter in a row."

Mr. Bacon continued, "Halfway through the year, we are on-track to achieve our full-year goals in terms of operational performance and profitability. Diversity is a key hallmark of our business as we offer a range of construction and service capabilities, marketed to a variety of industry verticals across different geographical regions in the US. Each of our verticals and geographic locations experiences its own, relatively independent supply and demand forces and, based on the activity we are seeing in our markets, we see no let-up in demand."

Mr. Bacon added, "As we head into the back half of the year, our current expectations are that this year will be similar to prior years, which has seen us realize higher revenues and greater profitability in the second half of the year."

Second Quarter Summary

Revenues
Q2 2019 revenues of $132.8 million were down 4.9% versus $139.5 million for the prior year period, as planned reductions in Mid-Atlantic region revenues offset growth across the Company's remaining regions. Service segment revenues of $27.8 million were up 7.9% while Construction segment revenues of $104.9 million were down 7.7%. Limbach continues to expect a year-over-year decline in its Mid-Atlantic region Construction revenues as a result of selectively pursuing only higher-margin projects tied to craft labor availability. Construction operations accounted for 79.0% of revenues with Service operations providing the remaining 21.0%.

Gross Margin
Gross margin for Q2 2019 was 13.1%, compared with 11.3% in the year ago quarter. Service segment gross margin improved modestly to 25.1%, compared with 24.4% in the year ago quarter, due primarily to improved project mix along with positive pricing trends. Construction segment gross margin improved to 9.9% for Q2 2019 compared to 8.4% for Q2 2018, due to improved profitability in the Mid-Atlantic region. On a dollar basis, gross profit in the second quarter was $17.4 million, compared with $15.8 million for the prior year period.

Selling, General and Administrative ("SG&A") Expense
Q2 2019 SG&A expenses were $17.1 million, compared to $13.7 million in the prior year period. The year-over-year increase in SG&A expenses was primarily due to retention payments made to workers, which excluded the senior management team, combined with increased staffing levels. As a percentage of total revenue, Q2 2019 SG&A expenses accounted for 12.9% of total revenues as compared with 9.8% in Q2 2018.

Net Income (Loss)
Net loss attributable to Limbach Holdings, Inc. common stockholders for Q2 2019 was $(1.5) million, compared with net income attributable to Limbach Holdings, Inc. common stockholders of $0.7 million in the prior year period.

Adjusted EBITDA
Adjusted EBITDA was $2.0 million in Q2 2019, compared with $3.9 million in the prior year period. The biggest contributor to the decline was the year over year increase in SG&A expense of $3.4 million, which was offset by improved gross profit levels.

Six Months YTD Summary

Revenues
Year-to-date 2019 revenues of $266.7 million were up 2.5% versus $260.1 million for the prior year period. Construction segment revenues of $209.6 million were down 0.4% while Service segment revenues of $57.1 million were up 15.3%. Construction segment revenues declined slightly due to the planned reduction in Mid-Atlantic region volume along with the substantial completion of a sizable project in the Michigan region since the second quarter of 2018. Increased Construction revenues in the Florida, New England and Western Pennsylvania regions substantially offset the declines noted in the Mid-Atlantic and Michigan regions. Service segment revenue growth was most pronounced in the Florida region as volume increased. Construction operations accounted for 78.6% of revenues while Service operations provided the remaining 21.4%.

Gross Margin
Gross margin for the first six months of 2019 was 14.0%, compared with 11.2% in the year ago period, as margins expanded in both of the Company's reporting segments. Service segment gross margin was 24.0%, compared with 20.8% in the year ago period due to improved pricing and volume. Construction segment gross margin was 11.3% for the year-to-date 2019 period compared to 8.9% for the comparable 2018 period, with the year over year improvement attributable primarily to the improved profitability in the Mid-Atlantic region along with strong margins on work in the Florida region. On a dollar basis, gross profit for the first six months of 2019 was $37.4 million, compared with $29.1 million for the prior year period.

Selling, General and Administrative Expense
Year to date 2019 SG&A expense was $33.1 million, compared to $29.4 million in the prior year period. The increase in SG&A expense was due to increased staffing; retention payments made to staff; and higher incentive accruals for all staff positions based on the improved year-to-date results. As a percentage of total revenue, 2019 year to date SG&A accounted for 12.4% compared with 11.3% in the prior year.

Net Income (Loss)
Net income attributable to Limbach Holdings, Inc. common stockholders for the first six months of 2019 was $0.6 million, compared with a net loss attributable to Limbach Holdings, Inc. common stockholders of $3.8 million in the prior year period. The main driver of the year over year improvement in Net Income was the improvement in gross margins, offset somewhat by increased SG&A expense.

Adjusted EBITDA
Adjusted EBITDA was $7.6 million for the year to date 2019, compared with $3.0 million in the prior year period. The year over year increase was due primarily to strong year over year performance in first quarter 2019 Adjusted EBITDA as compared to the prior year period.

Backlog
Aggregate backlog at June 30, 2019 was $586.2 million, compared with $559.7 million at December 31, 2018 and $492.5 million at June 30, 2018. The Company also has commitments for $408.4 million of Construction work which has not yet been recorded as backlog. Within the aggregate backlog figures, Construction backlog at June 30, 2019 was $536.8 million, versus $505.5 million at December 31, 2018 and $445.3 million at June 30, 2018. Service backlog was $49.4 million as of June 30, 2019 compared with $54.2 million at December 31, 2018 and $47.2 million at June 30, 2018. The Company expects approximately $239.5 million of total backlog to be converted to revenues within the current fiscal year.

Balance Sheet
At June 30, 2019, the Company had current assets of $184.6 million and current liabilities of $143.0 million, representing a current ratio of 1.29x. Working capital was $41.6 million at June 30, 2019, an increase of $18.7 million from December 31, 2018. Long-term debt was $40.0 million at June 30, 2019, up from $23.6 million at December 31, 2018. The Company had no borrowings against its $14.0 million credit revolver at June 30, 2019.

2019 Guidance
The Company is reaffirming its previously announced revenue and Adjusted EBITDA guidance for 2019, as summarized in the table below.

 

FY 2019 Estimates

 

Current

Previous

Revenues

$560 million

$560 million

Adjusted EBITDA

$22.5 million

$22.5 million

With respect to projected fiscal year 2019 Adjusted EBITDA, a quantitative reconciliation is not available without unreasonable efforts due to the high variability, complexity and low visibility with respect to taxes and other items, which are excluded from Adjusted EBITDA. We expect the variability of this item to have a potentially unpredictable, and potentially significant, impact on our future GAAP financial results.

Conference Call Details

Date:

Thursday, August 15, 2019

Time:

9 a.m. Eastern Time

 

 

Participant Dial-In Numbers:

Domestic callers:

866-604-1698

International callers:

201-389-0844

Access by Webcast
The call will also be simultaneously webcast over the Internet via the "Investor Relations" section of LMB's website at www.limbachinc.com or by clicking on the conference call link: https://78449.themediaframe.com/dataconf/productusers/lmb/mediaframe/31878/indexl.html. An audio replay of the call will be archived on the Company's website for 365 days.

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

 

Three months ended June 30,

Six months ended June 30,

(in thousands, except share data and per share data)

2019

 

2018

 

2019

 

2018

Revenue

$

132,753

$

139,531

$

266,704

$

260,080

Cost of revenue

115,352

123,733

229,270

230,995

Gross profit

17,401

15,798

37,434

29,085

Operating expenses:

Selling, general and administrative expenses

17,079

13,685

33,124

29,351

Amortization of intangibles

175

336

350

671

Total operating expenses

17,254

14,021

33,474

30,022

Operating income (loss)

147

1,777

3,960

(937)

Other income (expenses):

Interest expense, net

(1,597)

(799)

(2,430)

(1,568)

Gain (loss) on sale of property and equipment

9

24

21

40

Loss on debt extinguishment

(513)

0

(513)

0

Loss on change in fair value of warrant liability

(103)

0

(103)

0

Total other expenses

(2,204)

(775)

(3,025)

(1,528)

Income (loss) before income taxes

(2,057)

1,002

935

(2,465)

Income tax provision (benefit)

(553)

293

293

(750)

Net income (loss)

(1,504)

709

642

(1,715)

Dividends on cumulative redeemable convertible preferred stock

0

0

0

(113)

Premium paid on partial preferred stock redemption

0

0

0

2,219

Net income (loss) attributable to Limbach Holdings, Inc. common stockholders

$

(1,504)

$

709

$

642

$

(3,821)

 

 

Earnings Per Share ("EPS")

Basic earnings (loss) per share for common stock:

 

 

 

 

Net earnings (loss) attributable to Limbach Holdings, Inc. common stockholders

$

(0.20)

$

0.09

$

0.08

$

(0.51)

Diluted earnings (loss) per share for common stock:

 

 

 

 

Net earnings (loss) attributable to Limbach Holdings, Inc. common stockholders

$

(0.20)

$

0.09

$

0.08

$

(0.51)

Weighted average number of shares outstanding:

Basic

7,643,133

7,542,503

7,643,133

7,541,965

Diluted

7,643,133

7,807,768

7,717,484

7,541,965

LIMBACH HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

 June 30, 2019

 December 31, 2018

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

1,011

$

1,619

Restricted cash

113

113

Accounts receivable, net

142,761

135,687

Costs and estimated earnings in excess of billings on uncompleted contracts

36,030

32,698

Other current assets

4,637

34,869

Total current assets

184,552

204,986

Property and equipment, net

20,758

20,527

Intangible assets, net

12,603

12,953

Goodwill

10,488

10,488

Deferred tax asset

4,170

4,409

Other assets

798

271

Total assets

$

233,369

$

253,634

 

LIABILITIES

Current liabilities:

Current portion of long-term debt

$

2,173

$

3,141

Accounts payable, including retainage

69,702

74,353

Billing in excess of costs and estimated earnings on uncompleted contracts

46,536

50,843

Accrued income taxes

10

0

Accrued expenses and other current liabilities

24,575

53,801

Total current liabilities

142,996

182,138

Long-term debt

39,983

23,614

Other long-term liabilities

2,498

1,514

Total liabilities

185,477

207,266

Commitments and contingencies

Redeemable convertible preferred stock, net, par value of $0.0001, 1,000,000 shares authorized, no shares issued and outstanding at June 30, 2019 or December 31, 2018

0

0

STOCKHOLDERS' EQUITY

Common stock, par value $0.0001, 100,000,000 shares authorized; 7,643,133 issued and outstanding at June 30, 2019 and 7,592,911 at December 31, 2018

1

1

Additional paid-in capital

55,673

54,791

Accumulated deficit

(7,782)

(8,424)

Total stockholders' equity

47,892

46,368

Total liabilities and stockholders' equity

$

233,369

$

253,634

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six months ended June 30,

(in thousands)

2019

2018

Cash flows from operating activities:

Net income (loss)

$

642

$

(1,715)

Adjustments to reconcile net income to cash provided by (used in) operating activities:

Depreciation and amortization

2,873

2,798

Provision for doubtful accounts

33

47

Stock-based compensation expense

882

1,121

Amortization of debt discount and issuance costs

510

144

Deferred income tax provision (benefit)

239

(750)

Loss on debt extinguishment

513

0

Change in fair value of warrant liability

103

0

(Gain) loss on sale of property and equipment

(21)

(40)

Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable

(7,107)

(8,060)

(Increase) decrease in costs and estimated earnings in

excess of billings on uncompleted contracts

(3,332)

283

(Increase) decrease in other current assets (1)

30,138

(688)

(Increase) decrease in other assets

0

(289)

Increase (decrease) in accounts payable

(4,651)

(6,017)

Increase (decrease) in billings in excess of costs and estimated

earnings on uncompleted contracts

(4,307)

15,407

(Increase) decrease in prepaid income taxes (1)

 

101

 

(706)

(Increase) decrease in accrued taxes payable

-

(2,222)

Increase (decrease) in accrued expenses and other current liabilities

(32,190)

1,112

Increase (decrease) in other long-term liabilities

(87)

255

Net cash (used in) provided by operating activities

(15,661)

 

680

Cash flows from investing activities:

Proceeds from sale of property and equipment

77

123

Advances to joint ventures

1

0

Purchase of property and equipment

(1,229)

(2,117)

Net cash used in investing activities

(1,151)

(1,994)

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows - Continued

(Unaudited)

 

 

Six months ended June 30,

 

 

2019

 

2018

Cash flows from financing activities:

Increase (decrease) in bank overdrafts

2,783

4,869

Payments on Credit Agreement term loan

(14,335)

(1,500)

Proceeds from Credit Agreement revolver

17,500

67,039

Payments on Credit Agreement revolver

(17,500)

(66,594)

Proceeds from 2019 Revolving Credit Facility

7,500

0

Payments on 2019 Revolving Credit Facility

(7,500)

0

Proceeds from 2019 Refinancing Term Loan, net of debt discount

38,643

0

Warrants issued in conjunction with the 2019 Refinancing Term Loan

969

0

Embedded derivative associated with the 2019 Refinancing Term Loan

388

0

Proceeds from Bridge Term Loan

0

10,000

Payments on Bridge Term Loan

(7,736)

(1,764)

Payment on capital leases

(1,140)

(957)

Convertible preferred stock redeemed

0

(9,191)

Convertible preferred stock dividends paid

0

(875)

Payment of debt issue costs

(3,339)

0

Taxes paid related to net-share settlement of equity awards

(29)

(83)

Net cash provided by financing activities

16,204

944

Increase (decrease) in cash and cash equivalents

(608)

(370)

Cash, cash equivalents and restricted cash, beginning of period

1,732

739

Cash, cash equivalents and restricted cash, end of period

$

1,124

$

369

Supplemental disclosures of cash flow information

Noncash investing and financing transactions:

Property and equipment financed with capital leases

$

1,581

$

1,521

Interest paid

$

1,621

$

1,184

 

(1) The prior period has been reclassified to conform to the current period presentation.

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

Three months ended June 30,

 

Increase/(Decrease)

(in thousands, except for percentages)

2019

 

 

2018

 

$

 

%

Revenue:

 

Construction

$

104,925

79%

$

113,735

(8,810)

 

-7.7%

Service

27,828

25,796

2,032

 

7.9%

Total revenue

132,753

139,531

(6,778)

 

-4.9%

   

Gross profit:

 

Construction

10,422

9,501

921

 

9.7%

Service

6,979

6,297

682

 

10.8%

Total gross profit

17,401

15,798

1,603

 

10.1%

 

 

 

 

 

Selling, general and administrative expenses:

 

Construction

8,377

6,696

1,681

 

25.1%

Service

4,460

3,345

1,115

 

33.3%

Corporate

4,242

3,644

598

 

16.4%

Total selling, general and administrative expenses

17,079

12.9%

13,685

9.8%

3,394

 

24.8%

   

Amortization of intangibles (Corporate)

175

336

(161)

 

-47.9%

   

Operating income (loss):

 

Construction

2,045

2,805

(760)

 

-27.1%

Service

2,519

2,952

(433)

 

-14.7%

Corporate

(4,417)

(3,980)

(437)

 

-11.0%

Total operating income (loss)

$

147

$

1,777

(1,630)

 

-91.7%

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

Six months ended June 30,

Increase/(Decrease)

(in thousands, except for percentages)

2019

 

 

2018

 

$

 

%

Revenue:

Construction

$

209,599

79%

$

210,545

(946)

-0.4%

Service

57,105

49,535

7,570

15.3%

Total revenue

266,704

260,080

6,624

2.5%

 

Gross profit:

Construction

23,735

18,772

4,963

26.4%

Service

13,699

10,313

3,386

32.8%

Total gross profit

37,434

29,085

8,349

28.7%

 

 

 

 

Selling, general and administrative expenses:

Construction

15,841

14,455

1,386

9.6%

Service

8,771

7,471

1,300

17.4%

Corporate

8,512

7,425

1,087

14.6%

Total selling, general and administrative expenses

33,124

12.4%

29,351

11.3%

3,773

12.9%

 

Amortization of intangibles (Corporate)

350

671

(321)

-47.8%

 

Operating income (loss):

Construction

7,894

4,317

3,577

82.9%

Service

4,928

2,842

2,086

73.4%

Corporate

(8,862)

(8,096)

(766)

-9.5%

Total operating income (loss)

$

3,960

$

(937)

4,897

522.6%

* Use of Non-GAAP Financial Measures

Adjusted EBITDA

In assessing the performance of our business, management utilizes a variety of financial and performance measures. The key measure is Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss) 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 believe that Adjusted EBITDA is 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 Adjusted EBITDA is 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. Our calculation of Adjusted EBITDA, 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 (loss) calculated in accordance with GAAP. Further, the results presented by Adjusted EBITDA cannot be achieved without incurring the costs that the measure excludes. A reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP measure, is provided below.

Reconciliation of Adjusted EBITDA to Net Income (Loss)

 

Three months ended June 30,

Six months ended June 30,

(in thousands)

2019

2018

2019

2018

Net income (loss)

$

(1,504)

$

709

$

642

$

(1,715)

 

Adjustments:

Depreciation and amortization

1,460

1,427

2,873

2,798

Interest expense

1,597

799

2,430

1,568

Non-cash Stock-based compensation expense

 

515

654

882

1,121

Loss on debt extinguishment

 

513

 

0

 

513

 

0

Income tax provision (benefit)

(553)

293

293

(750)

Adjusted EBITDA

$

2,028

$

3,882

$

7,633

$

3,022

About Limbach
Founded in 1901, Limbach is the 9th largest mechanical systems solutions firm in the United States as determined by Engineering News Record. Limbach provides building infrastructure services, with an expertise in the design, installation and maintenance of HVAC and mechanical, electrical, and plumbing systems for a diversified group of commercial and institutional building owners. Limbach employs more than 1,700 employees in 14 offices throughout the United States. The Company's full life-cycle capabilities, from concept design and engineering through system commissioning and recurring 24/7 service and maintenance, position Limbach as a value-added and essential partner for building owners, construction managers, general contractors and energy service companies.

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, capital expenditures or other future financial or business performance or strategies, results of operations or financial condition. 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" 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. 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 Form 10-K filed on April 15, 2019, which is 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 presentation.


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