Second Quarter 2017 Revenues up 21.9%;
Backlog up 23.5% from March 31, 2017
Conference Call Scheduled for 9:00am ET
Tuesday August 15, 2017
Limbach Holdings, Inc. (NASDAQ:LMB) (“Limbach” or the “Company”)
today announced financial results for the quarter ended June 30,
2017. Revenues increased 21.9% versus the prior year period to
$117.8 million in the second quarter of 2017. Construction segment
revenue of $96.2 million grew 24.4% from the prior year quarter
while Service segment revenues rose 11.9%.
Other key financial highlights of the quarter included:
- Diluted EPS was $0.05 during the
quarter. Excluding the impact of certain non-recurring 2016 audit
expenses, diluted EPS would have been $0.10.
- Gross margin was 13.2%, compared with
12.0% in the first quarter of 2017. This continued the trend seen
last quarter of improving project mix in the Construction segment
coupled with higher-margin Service segment revenues, which continue
to increase.
- Year over year Construction segment
revenue growth of 24.4%, led by the Michigan, New England and
Mid-Atlantic branches.
- Net income was $0.4 million, compared
to net income of $2.0 million for the prior year quarter in which
the Company operated as a private business and thus incurred no
public company expenses.
- Revenues were split 81.7%/18.3% between
Construction and Service segments.
- Combined Construction and Service
Backlog stands at a record $513.8 million with booked gross margin
up 10% over June 30, 2016.
- Maintenance Base grew by 10% in the
first 6 months of the year to $12.2 million.
- Combined Construction and Service sales
pipeline stands at $3.1 billion compared to $2.4 billion at
December 31, 2016.
Management Commentary
Charlie Bacon, CEO of Limbach, commented, “The second quarter of
2017 saw Limbach continue growing in excess of the broader
non-residential construction market while a sharp uptick in backlog
sets the stage for that growth to continue into 2018. Our
Construction segment revenues were up 24.4% in the quarter versus
last year’s period while our Service segment grew 11.9%. Our
overall backlog is now over half a billion dollars, at $513.8
million, representing growth of 23.5% from March 31, 2017. That
impressive growth gives us good confidence in achieving our
financial objectives for 2017, while also giving us a nice
head-start on 2018. We have also realized a 10% growth in margin
within our backlog over the same period last year, which will lead
to improving gross margin.”
Mr. Bacon continued, “Within our Service segment we continue to
see strong demand for our direct to owner offerings, as evidenced
by a large maintenance contract we secured with the University of
Southern California (“USC”), a project on which we completed
construction earlier this year. This type of ‘end to end’
opportunity, where we provide both the Construction and Service
work for a building, is strong affirmation that building owners
recognize the quality work and value we provide. As our
design-assist and design-build win rates continue to drive sales,
we also expect to deepen our relationships with building owners and
to achieve further success similar to our experience at USC. I
should also note the general contractor in the USC project,
Hathaway Dinwiddie, awarded us two other major projects in Los
Angeles after completing the USC project. This is a great example
of achieving our company vision of being 1st Choice with both a
major building owner and a substantial regional general contractor.
Additionally, I want to note that our engineering group, Limbach
Engineering and Design Services, (LEDS) continues to separate us
from the competition. These services are becoming a disruptor in
the industry. Our engineering approach is allowing us to outpace
the market with our growth and gain more regional market
share.”
Second Quarter
Highlights
Revenues
Second quarter 2017 revenues of $117.8 million were up 21.9%
versus $96.6 million for the prior year period, led by Construction
segment growth of 24.4%. Service segment revenues were also up
solidly, with growth of 11.9% versus the prior year period. As a
percentage of revenues, Construction represented 81.7% while
Service provided the remaining 18.3%.
Gross Margin
Gross margin for the second quarter of 2017 was 13.2%, up from
12.0% for the first quarter of 2017, although down from 13.6% in
the second quarter of 2016. On a dollar basis, gross profit in the
first quarter was $15.5 million, compared with $13.2 million for
the prior year period. Project mix in the Construction segment was
the largest driver of improved margins, aided by higher-margin
Service work. In addition, work on a large, lower-margin project
that the Company has previously discussed is nearing completion. As
a result, this project accounted for a lower proportion of
Construction segment revenues in the quarter. Construction segment
gross margin was 11.4% in the second quarter of 2017, up from 9.8%
in the first quarter of 2017, although down slightly from 11.6% in
the second quarter of 2016. Service segment gross margin decreased
modestly to 21.1% in the second quarter of 2017, versus 21.9% in
the year-ago period due to continued wins of larger-dollar,
lower-margin owner direct projects.
Operating Income
The Company reported operating income of $1.7 million compared
to operating income of $2.9 million for the prior year period. The
decline in operating income was due primarily to increased Selling,
General and Administrative expenses, including those driven by the
Company’s public listing that were not present in the year-ago
period. Second quarter 2017 Selling, General and Administrative
expense increased to $12.8 million from $10.3 million in the second
quarter of 2016. Compared with the first quarter of 2017, Selling,
General and Administrative expense declined $1.8 million from $14.6
million due to the reduction of non-recurring expenses tied to the
Company’s 2016 audit. During the quarter, these non-recurring 2016
audit expenses totaled $0.6 million. As a percentage of total
revenue, second quarter 2017 SG&A accounted for 10.9% compared
with 10.6% of total revenue in the second quarter of 2016. Without
the non-recurring audit expenses, SG&A would have been 10.4% of
total revenue.
Six Month Highlights
Revenues
Year to date 2017 revenues of $233.0 million were up 19.8%
versus $194.5 million for the prior year period, led by Service
segment growth of 27.7%. Construction segment revenues also
featured solid growth of 18.1% versus the prior year period. As a
percentage of revenues, Construction represented 80.5% while
Service provided the remaining 19.5%.
Gross Margin
Gross margin for the six months to date in 2017 was 12.6% versus
13.0% for the first half of 2016. On a dollar basis, gross profit
in the 2017 six-month period was $29.3 million, compared with $25.3
million for the prior year period. Year to date gross margin in
2017 decreased slightly versus the prior year due primarily to a
single, large project which carries a lower margin profile than
average. Construction segment gross margin was 10.6% in the first
six months of 2017, down from 11.1% in the same period a year ago.
Service segment gross margin decreased to 20.7% in the year to
date, versus 21.6% in the year-ago period due to continued wins of
larger-dollar, lower-margin owner direct projects.
Operating Income
For the first six months of 2017, the Company reported an
operating loss of $71,000 compared to operating income of $5.2
million for the prior year period. The decline in operating income
was due primarily to increased Selling, General and Administrative
expenses, including those driven by the Company’s public listing
that were not present in the year-ago period. Year to date 2017
Selling, General and Administrative expense increased to $27.4
million from $20.1 million in the first half of 2016. As a
percentage of total revenue, 2017 year to date SG&A accounted
for 11.7% compared with 10.3% of total revenue in the same period
of 2016. For the first six months of 2017, we incurred a total of
$1.7 million of non-recurring expense. Excluding these expenses,
our SG&A expense accounted for 11.0% of first half revenue. The
Company also recorded $2.0 million of intangible amortization
expense in the first half of 2017, versus no such expense in the
prior year period.
Backlog
Aggregate backlog at the end of the second quarter was $513.8
million, an increase of 18.3% compared with $434.3 million at
December 31, 2016. Backlog as of June 30, 2017 was also up 23.5%
from the level at March 31, 2017. As noted in the Q1 2017 earnings
report, the Company had a number of projects which had been awarded
but were awaiting firm construction values, at which time the
Company formally takes projects into backlog. This process is a
routine aspect of design build/design assist contracts, which
constitute a growing portion of the Company’s business. The Company
has commitments for new contracts of another $72.0 million that
will be booked once firm, fixed prices are established.
Within the aggregate backlog figures, Construction backlog at
June 30, 2017 was $469.3 million, an increase of 20.3% from $390.2
million at December 31, 2016. The Company expects approximately 47%
of total backlog to be converted to revenues within the current
fiscal year. In addition, Service backlog at June 30, 2017 was
$44.5 million compared to $44.1 million as of December 31, 2016, an
increase of 1.0%.
Balance Sheet
At June 30, 2017, the Company had current assets of $137.4
million and current liabilities of $110.2 million, representing a
current ratio of 1.25x. Working capital was $27.1 million at June
30, 2017, a decrease of $1.3 million or 4.7% from December 31,
2016. Long-term debt, net of the current portion, was $18.1 million
at June 30, 2017, down from both $21.5 million at December 31, 2016
and $26.8 million at March 31, 2017.
2017 Guidance
The Company is reaffirming its previously issued revenue and
Adjusted EBITDA guidance for 2017:
FY 2017 Estimate Revenues
$460 - $480 million Adjusted EBITDA $18
– 20 million
With respect to projected fiscal 2017 Adjusted EBITDA, a
quantitative reconciliation is not available without unreasonable
efforts due to the high variability, complexity and low visibility
with respect to taxes, 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: Tuesday, August 15, 2017 Time: 9:00 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:
http://limbachinc.equisolvewebcast.com/q2-2017. 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)
Successor Predecessor Successor
Predecessor Three months ended June 30, Six
months ended June 30, (in thousands, except share data and per
share data)
2017 2016 2017
2016 Revenue $ 117,838 $ 96,648 $ 233,028 $ 194,467 Cost of
revenue 102,300 83,462 203,722 169,140
Gross profit 15,538 13,186 29,306 25,327 Operating expenses:
Selling, general and administrative expenses 12,787 10,277 27,353
20,118 Amortization of intangibles 1,016 -
2,024 - Total operating expenses 13,803 10,277
29,377 20,118 Operating income (loss) 1,735
2,909 (71) 5,209 Other income (expenses):
Interest income (expense), net (563) (884) (1,017) (1,719) (Loss)
on disposition of property and equipment (99) (7)
(136) (3) Total other expenses (662)
(891) (1,153) (1,722) Income (loss) before income
taxes 1,073 2,018 (1,224) 3,487 Income tax (expense) benefit
(404) - 679 - Net income (loss) 669 2,018
(545) 3,487 Dividends on cumulative redeemable convertible
preferred stock 244 - 482 - Net
earnings (loss) attributable to Limbach Holdings, Inc. common
stockholders $ 425 $ (1,027) Net income attributable to Limbach
Holdings LLC member unit holders $ 2,018 $ 3,487
Successor
EPS
Basic earnings (loss) per share for common stock: Net
earnings (loss) attributable to Limbach Holdings, Inc. common
stockholders $ 0.06 $ (0.14) Diluted earnings (loss) per share for
common stock: Net earnings (loss) attributable to
Limbach Holdings, Inc. common stockholders $ 0.05 $ (0.14) Weighted
average number of shares outstanding: Basic 7,454,564 7,454,528
Diluted 7,795,484 7,454,528
LIMBACH HOLDINGS,
INC. Condensed Consolidated Balance Sheets
Successor (in thousands, except share data)
June 30,
2017 December 31, 2016 (Unaudited)
ASSETS Current assets: Cash and cash equivalents $
685 $ 7,406 Restricted cash 113 113 Accounts receivable - trade,
net 102,509 113,972 Costs and estimated earnings in excess of
billings on uncompleted contracts 30,119 31,959 Other current
assets 3,941 1,733
Total current assets
137,367 155,183 Property and equipment, net of accumulated
depreciation of $5.9 million and $2.6 million at June 30, 2017 and
December 31, 2016, respectively 17,438 18,541 Intangible assets,
net 15,783 17,807 Goodwill 10,488 10,488 Deferred tax asset 4,947
4,268 Other assets 527 588
Total assets $
186,550 $ 206,875
LIABILITIES Current
liabilities: Current portion of long-term debt $ 5,390 $ 4,476
Accounts payable, including retainage 45,833 57,034 Billing in
excess of costs and estimated earnings on uncompleted contracts
30,203 39,190 Accrued expenses and other current liabilities
28,819 26,029
Total current liabilities 110,245
126,729 Long-term debt, net of current portion and debt issuance
costs 18,110 21,507 Other long-term liabilities 914
817
Total liabilities 129,269 149,053 Commitments and
contingencies - -
Redeemable convertible preferred stock,
net, par value of $0.0001, 1,000,000 shares authorized, 400,000
issued and outstanding as of June 30, 2017 and December 31, 2016,
respectively ($10,780 and $10,365 redemption value at June 30, 2017
and December 31, 2016, respectively)
10,860 10,374
STOCKHOLDERS' EQUITY AND MEMBERS' EQUITY
Common stock, par value $0.0001, 100,000,000 shares authorized;
7,454,602 issued and outstanding at June 30, 2017 and 7,454,491 at
December 31, 2016 1 1 Additional paid-in capital 55,162 55,162
Accumulated deficit (8,742) (7,715)
Total
stockholders' equity 46,421 47,448
Total
liabilities and stockholders' equity $ 186,550 $ 206,875
LIMBACH HOLDINGS, INC. Condensed Consolidated
Statements of Cash Flows (Unaudited)
Successor Predecessor (in
thousands)
Six months ended June 30, Cash
flows from operating activities: 2017 2016 Net
income (loss) $ (545) $ 3,487 Adjustments to reconcile net income
to cash provided by operating activities: Depreciation and
amortization 5,359 1,433 Allowance for doubtful accounts 245 48
Capitalized deferred interest on subordinated debt - 1,234
Amortization of debt issuance costs 90 - Deferred income tax
provision (679) - Accretion of preferred stock discount to
redemption value 4 - (Gain) loss on disposition of property and
equipment 136 3 Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 11,218 (6,813)
(Increase) decrease in costs and estimated earnings in excess of
billings on uncompleted contracts 1,840 (2,439) (Increase) decrease
in other current assets (72) (493) (Increase) decrease in other
assets - (39) Increase (decrease) in accounts payable (11,201)
(3,006) Increase (decrease) in billings in excess of costs and
estimated earnings on uncompleted contracts (8,987) 9,814 Increase
(decrease) in accrued expenses and other current liabilities 2,789
(2,389) Increase (decrease) in other long-term liabilities
97 245
Net cash provided by operating
activities 294 1,085
Cash flows
from investing activities: Proceeds from sale of property and
equipment 7 7 Purchase of property and equipment (1,656)
(1,662)
Net cash used in investing
activities (1,649) (1,655)
Cash
flows from financing activities: Proceeds from revolving credit
facility - 55,611 Payments on revolving credit facility - (57,611)
Payments Credit Agreement term loan (3,365) - Proceeds from Credit
Agreement revolver 44,553 - Payments on Credit Agreement revolver
(44,553) - Payments on term loan (33) (1,038) Payments on financed
insurance premium (1,164) - Payment of distributions - (162)
Payment on capital leases (804) (650)
Net cash used in financing activities (5,366)
(3,850)
Decrease in cash and cash equivalents
(6,721) (4,420) Cash and cash equivalents, beginning of period,
Limbach Holdings, Inc. 7,406 - Cash and cash equivalents, beginning
of period, Limbach Holdings LLC - 6,107
Cash and cash equivalents, end of period $ 685 $
1,687
Supplemental disclosures of cash flow information
Noncash investing and financing transactions: Property and
equipment acquired with capital leases $ 718 $ 873 Financed
insurance premium $ 2,135 $ - Interest paid $ 927 $ 512
LIMBACH HOLDINGS, INC. Operating Results by Segment
(Unaudited)
Successor Predecessor Three months ended June
30, Increase/ (amounts in thousands except for
percentages)
2017 2016 (Decrease) ($)
($) $ % Revenue: Construction $ 96,221 $
77,329 $ 18,892 24.4% Service 21,617 19,319
2,298 11.9% Total revenue 117,838 96,648
21,190 21.9% Cost of revenue Construction 85,242 68,376
16,866 24.7% Service 17,058 15,086 1,972 13.1%
Total cost of revenue 102,300 83,462 18,838
22.6% Gross profit: Construction 10,979 8,953 2,026 22.6%
Service 4,559 4,233 326 7.7% Total gross
profit 15,538 13,186 2,352 17.8%
Selling, general and administrative expenses: Construction 5,172
5,168 4 0.1% Service 3,551 2,841 710 25.0% Corporate 4,064
2,268 1,796 79.2% Total selling, general and
administrative expenses 12,787 10,277 2,510
24.4% Amortization of intangibles 1,016 - 1,016 100.0%
Operating income (loss): Construction 5,807 3,785 2,022
53.4% Service 1,008 1,392 (384) -27.6% Corporate (5,080)
(2,268) (2,812) -124.0% Operating income (loss) $
1,735 $ 2,909 $ (1,174) -40.4%
LIMBACH HOLDINGS,
INC. Operating Results by Segment (Unaudited)
Successor
Predecessor Six months ended June 30,
Increase/ (amounts in thousands except for percentages)
2017 2016 (Decrease) ($) ($)
$ % Revenue: Construction $ 187,686 $ 158,949 $
28,737 18.1% Service 45,342 35,518 9,824 27.7%
Total revenue 233,028 194,467 38,561 19.8%
Cost of revenue Construction 167,758 141,288 26,470 18.7%
Service 35,964 27,852 8,112 29.1% Total cost
of revenue 203,722 169,140 34,582 20.4%
Gross profit: Construction 19,928 17,661 2,267 12.8% Service
9,378 7,666 1,712 22.3% Total gross profit
29,306 25,327 3,979 15.7% Selling, general and
administrative expenses: Construction 12,453 10,531 1,922 18.3%
Service 7,002 5,743 1,259 21.9% Corporate 7,898 3,844
4,054 105.5% Total selling, general and administrative
expenses 27,353 20,118 7,235 36.0%
Amortization of intangibles 2,024 - 2,024 100.0% Operating
income (loss): Construction 7,475 7,130 345 4.8% Service 2,376
1,923 453 23.6% Corporate (9,922) (3,844)
(6,078) -158.1% Operating income (loss) $ (71) $ 5,209 $ (5,280)
-101.4%
* 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 expenses or expenses that are unusual or
non-recurring. 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)
Successor
Predecessor Successor Predecessor
Three months ended June 30, Six months
ended June 30, (in thousands)
2017 2016
2017 2016 Net income (loss) $ 425 $ 2,018 $ (1,027) $
3,487 Adjustments: Depreciation and amortization 2,713 739
5,359 1,433 Interest expense 563 884 1,017 1,719 Income tax expense
(benefit) 404 - (679) - Adjusted EBITDA
$ 4,105 $ 3,641 $ 4,670 $ 6,639
About Limbach
Limbach Holdings, Inc. is an integrated building systems
provider – managing all components of mechanical, electrical,
plumbing and control systems, from system design and construction
through performance and maintenance. The Company engineers,
constructs and services the mechanical, plumbing, air conditioning,
heating, building automation, electrical and control systems in
both new and existing buildings. Customers include building owners
in the private, not-for-profit and public/government sectors. With
headquarters in Pittsburgh, PA, Limbach operates from 10
strategically located business units throughout the United States
including Western Pennsylvania (Pittsburgh), Eastern Pennsylvania
(Warrington, PA), New Jersey (South Brunswick), New England
(Wilmington, MA), Ohio (Columbus and Athens, OH), Michigan (Pontiac
and Lansing, MI), Southern California (Seal Beach, CA), and
Mid-Atlantic (Laurel, MD). Our design engineering and innovation
center, Limbach Engineering & Design Services, is based in
Orlando, Florida. Harper Building Systems, a Limbach Holdings, Inc.
company, operates throughout Florida with offices in Tampa and Lake
Mary, North of Orlando. Our approximately 1,500 employees strive to
be the customer’s 1st Choice in terms of the services provided,
vertical markets and geographies served. Our commitment to safety,
advanced technology, human development and reliable execution has
enabled Limbach to attract and retain the industry’s top leadership
talent, skilled craftspeople and professional management staff.
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 most recent annual report on Form 10-K , 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 press release.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170814005924/en/
Investor Relations:The Equity Group Inc.Jeremy Hellman,
CFASenior Associate212-836-9626jhellman@equityny.comorLimbach
Holdings, Inc.John T. Jordan, Jr.Executive Vice President and Chief
Financial Officer301-623-4799john.jordan@limbachinc.com
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