Q1 2018 Revenues of $120.5 Million;
Construction Revenues of $96.8 Million
Conference Call Scheduled for 9:00am ET
Wednesday May 16, 2018
Limbach Holdings, Inc. (NASDAQ:LMB) (“Limbach” or the “Company”)
today announced financial results for the quarter ended March 31,
2018. Total revenues increased 4.7% versus the prior year period to
$120.5 million in the first quarter of 2018. Construction segment
revenue of $96.8 million grew 5.8% from the prior year period while
Service segment revenues were flat at $23.7 million.
Other key financial highlights of the quarter included:
- Gross margin was 11.0% in the first
quarter of 2018, compared with 11.9% in the first quarter of the
prior year. During the first quarter of 2018, gross profit was
negatively impacted by $4.6 million of project-related write-downs.
Excluding the impact of those write-downs, gross margin would have
been 15.9%.
- Construction revenue growth of 5.8%
versus the same quarter in 2017 was primarily the result of strong
performances in the Ohio, New England, Harper and Eastern
Pennsylvania regions, offset by declines in the Michigan and
Western Pennsylvania regions.
- Selling, General and Administrative
(“SG&A”) expenses totaled $15.7 million in the first quarter of
2018, compared with $14.6 million in the same quarter a year ago.
As a percentage of revenues, SG&A expense was 13.0% in the
first quarter of 2018, versus 12.6% in the first quarter of 2017.
First Quarter 2018 SG&A included approximately $0.5 million of
stock compensation expense that was not incurred in the prior year
quarter.
- Net loss in the first quarter of 2018
was $(2.4) million, compared with $(1.2) million for the same
quarter in 2017.
- Construction operations contributed
80.3% of total revenue, while Service operations contributed
19.7%.
- Aggregate backlog at March 31, 2018 was
$452.5 million, compared with $461.4 million at December 31, 2017.
Current backlog consists of $38.6 million of Service work and
$413.9 million of Construction work. Limbach expects approximately
$291.0 million of current, aggregate backlog to be recognized as
revenue in fiscal 2018.
- Combined Construction and Service sales
pipeline, a measure of opportunities the Company is tracking,
continues to be robust and has grown to $3.4 billion.
- The Company is increasing 2018 revenue
guidance by $10 million to a range from $520 million to $540
million; Adjusted EBITDA guidance remains unchanged.
Management Commentary
Charlie Bacon, CEO of Limbach, commented, “Our 2018 sales effort
is off to a great start as we have 94% of our budgeted sales for
the year either in firm backlog or with firm commitments. We also
have a number of projects that we are pursuing and which we feel
our odds of winning are very good. Our Limbach Engineering and
Design Services (“LEDS”) center in Orlando continues to be a key
differentiator for us as 34% of our secured Construction segment
opportunities are ‘Design-Build’ work. With that in mind, I am
pleased to note that we are increasing our revenue guidance for the
year.
The macroeconomic backdrop for the non-residential construction
industry continues to be very favorable, with the Tax Cuts and Jobs
Act lending further support to corporate capital expenditure
budgets. We monitor a variety of key indicators, including the
American Institute of Architects (“AIA”) billing index, along with
research groups such as FMI and Dodge Analytics. All continue to
support the growth outlook we are seeing in the field.”
Mr. Bacon continued, “Labor shortages remain a hot-button issue
for our industry and we are being as proactive as we can to remain
ahead of the curve. An example of the impact labor can have can be
seen in the write-downs we were forced to take in the quarter. As a
whole, we had several significant projects concurrently underway
within the Mid-Atlantic region with high craft labor requirements
all hitting the business at once, which put pressure on our
management and craft worker resources. In two cases, project
timelines were negatively impacted by forces out of our control,
such as the late delivery of structural steel. Given the extreme
tight labor situation in the Mid-Atlantic geography, adding extra
workers to get our share of the project done on time increased our
costs. To address these issues, we are making investments in our
employee training and advancement programs and expanding our
modular construction initiative to reduce onsite labor, which we
believe will serve Limbach well in the years ahead.”
First Quarter Summary
Revenues
First quarter 2018 revenues of $120.5 million were up 4.7%
versus $115.2 million for the prior year period, driven by
Construction segment growth of 5.8%. Service segment revenues were
flat year over year at $23.7 million due to revenue growth in the
Mid-Atlantic and Eastern Pennsylvania regions that was more than
offset by revenue decreases in the Michigan and New England
regions, primarily due to two projects that were completed since
the first quarter of 2017. Construction operations accounted for
80.3% of revenues while Service operations provided the remaining
19.7%.
Gross Margin
Gross margin for the first quarter of 2018 was 11%, compared
with 11.9% in the year ago quarter. During the first quarter of
2018 the Company incurred write-downs of approximately $4.6 million
on six jobs, due to revisions in contract estimates. Excluding the
write-downs, gross margin would have been 15.9%, which was level
with the fourth quarter of 2017. On a dollar basis, gross profit in
the first quarter was $13.3 million, compared with $13.8 million
for the prior year period.
Selling, General and Administrative
Expense
First quarter of 2018 SG&A expense was $15.7 million,
compared to $14.6 million in the prior year period. As a percentage
of total revenue, first quarter 2018 SG&A accounted for 13.0%
compared with 12.6% in the first quarter of 2017. Year over year
growth in SG&A, both in absolute dollars and as a percentage of
revenue, was driven by higher salary and benefit expense as the
Company continued to add staff. In addition, during the first
quarter of 2018 the Company incurred approximately $0.5 million of
stock compensation expense that was not present in the year ago
quarter.
Net Loss
Net loss for the first quarter of 2018 was $(2.4) million,
compared with a net loss of $(1.2) million in the prior year
period, as project write-downs negatively impacted profitability.
The Company also incurred a charge of $2.2 million due to the
premium paid on the redemption of its previously-outstanding
redeemable convertible preferred stock. As a result, Net loss
attributable to Limbach Holdings, Inc. common stockholders was
$(4.5) million, or $(0.60) per diluted loss per share of common
stock.
Backlog
Aggregate backlog at March 31, 2018 was $452.5 million, a
decrease of 1.9% compared with $461.4 million at December 31, 2017.
The Company also has commitments for $143.8 million of Construction
work which has not yet been recorded as backlog. Within the
aggregate backlog figures, Construction backlog at March 31, 2018
was $413.9 million, a decrease of 2.9% from $426.7 million at
December 31, 2017. In addition, Service backlog at March 31, 2018
was $38.6 million compared to $34.7 million as of December 31,
2017. The Company expects approximately $291.0 million of total
backlog to be converted to revenues within the current fiscal
year.
Balance Sheet
At March 31, 2018, the Company had current assets of $161.6
million and current liabilities of $129.2 million, representing a
current ratio of 1.25x. Working capital was $32.4 million at March
31, 2018, an increase of $1.6 million from December 31, 2017.
Long-term debt was $35.2 million at March 31, 2018, up from $20.6
million at December 31, 2017.
2018 Guidance
The Company is increasing its previously announced revenue
guidance for 2018 while keeping Adjusted EBITDA guidance unchanged,
summarized in the table below.
FY 2018 Estimates Current
Previous Revenues $520 - $540 million $510 - $530
million Adjusted EBITDA $20 - $24 million $20 - $24 million
With respect to projected fiscal year 2018 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: Wednesday, May 16, 2018 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/q1-2018. 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 March 31, (in thousands, except share
data and per share data)
2018 2017 Revenue $
120,549 $ 115,190 Cost of revenue 107,262 101,421 Gross profit
13,287 13,769 Operating expenses: Selling, general and
administrative expenses 15,666 14,567 Amortization of intangibles
335 1,008 Total operating expenses 16,001 15,575 Operating loss
(2,714 ) (1,806 ) Other income (expenses): Interest expense, net
(769 ) (454 ) Gain (loss) on sale of property and equipment 16 (37
) Total other expenses (753 ) (491 ) Loss before income taxes
(3,467 ) (2,297 ) Income tax benefit (1,043 ) (1,083 ) Net loss
(2,424 ) (1,214 ) Dividends on cumulative redeemable convertible
preferred stock (113 ) 238 Premium paid on redemption of redeemable
convertible preferred stock 2,219 0 Net loss attributable to
Limbach Holdings, Inc. common stockholders $ (4,530 ) $ (1,452 )
Earnings Per Share
("EPS")
Basic loss per share for common stock: Net loss attributable to
Limbach Holdings, Inc. common
stockholders
$ (0.60 ) $ (0.19 ) Diluted loss per share for common stock: Net
loss attributable to Limbach Holdings, Inc. common
stockholders
$ (0.60 ) $ (0.19 ) Weighted average number of shares outstanding:
Basic 7,541,422 7,454,491 Diluted 7,541,422 7,454,491
LIMBACH HOLDINGS, INC. Condensed Consolidated Balance
Sheets (in thousands, except share data)
March 31, 2018 December 31, 2017
(Unaudited) ASSETS Current assets: Cash and
cash equivalents $ 375 $ 626 Restricted cash 113 113 Accounts
receivable, net 126,843 129,343 Costs and estimated earnings in
excess of billings on uncompleted contracts 29,969 33,006 Other
current assets 4,300 3,172
Total current assets
161,600 166,260 Property and equipment, net 18,320 17,918
Intangible assets, net 13,890 14,225 Goodwill 10,488 10,488
Deferred tax asset 4,707 3,664 Other assets 493 465
Total
assets $ 209,498 $ 213,020
LIABILITIES
Current liabilities: Current portion of long-term debt $
7,301 $ 6,358 Accounts payable, including retainage 62,077 67,438
Billings in excess of costs and estimated earnings on uncompleted
contracts 31,181 28,543 Accrued income taxes 2,088 2,220 Accrued
expenses and other current liabilities 26,528 30,925
Total current liabilities 129,175 135,484 Long-term debt,
net 35,188 20,556 Other long-term liabilities 1,038 861
Total liabilities 165,401 156,901 Redeemable
convertible preferred stock, net, par value of $0.0001, 1,000,000
shares authorized, no shares issued and outstanding at March 31,
2018 and 280,000 issued and outstanding at December 31, 2017,
respectively ($7,853 redemption value at December 31, 2017) 0 7,959
STOCKHOLDERS' EQUITY AND MEMBERS' EQUITY Common
stock, par value $0.0001, 100,000,000 shares authorized; 7,542,249
issued and outstanding at March 31, 2018 and 7,504,133 at December
31, 2017 1 1 Additional paid-in capital 53,099 54,738 Accumulated
deficit (9,003 ) (6,579
)
Total stockholders' equity 44,097 48,160
Total
liabilities and stockholders' equity $ 209,498 $ 213,020
LIMBACH HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited) (in thousands)
Three months ended
March 31, Cash flows from operating activities:
2018
2017
Net loss $ (2,424
)
(1,214
) Adjustments to reconcile net income to cash provided by operating
activities: Depreciation and amortization 1,371
2,646
Allowance for doubtful accounts 20
266
Stock-based compensation expense 467
0
Amortization of debt issuance costs 68
45
Deferred income tax benefit (1,043 )
(1,083
) Accretion of preferred stock discount to redemption value 0
2
(Gain) loss on sale of property and equipment (16 )
37
Changes in operating assets and liabilities: (Increase) decrease in
accounts receivable 2,481
6,231
(Increase) decrease in costs and estimated earnings in excess of
billings on uncompleted contracts 3,037
2,237
(Increase) decrease in other current assets (1,129 )
(573
) (Increase) decrease in other assets (210 )
0
Increase (decrease) in accounts payable (5,362 )
(3,197
) Increase (decrease) in billings in excess of costs and estimated
earnings on uncompleted contracts 2,639
(5,075
) Increase (decrease) in accrued taxes (134 )
0
Increase (decrease) in accrued expenses and other current
liabilities (16 )
(4,955
) Increase (decrease) in other long-term liabilities 177
94
)
Net cash used in operating activities (74 )
(4,727
)
Cash flows from investing activities: Proceeds from sale
of property and equipment 71
7
Decrease (increase) in advances to joint ventures 1
0
Purchase of property and equipment (775 )
(630
)
Net cash used in investing activities (703 )
(623
)
LIMBACH HOLDINGS, INC. Condensed
Consolidated Statements of Cash Flows (continued)
(Unaudited) Three months ended March
31, 2018 2017 Cash flows from financing
activities: Increase (decrease) in bank overdrafts (4,299 ) 0
Payments on Credit Agreement term loan (750 ) (750 ) Proceeds from
Credit Agreement revolver 41,296 13,034 Payments on Credit
Agreement revolver (34,849 ) (7,034 ) Payments on term loan 0 (20)
Proceeds from Bridge Term Loan 10,000 0 Payments on Bridge Term
Loan (250 ) 0 Payments on financed insurance premium 0 (591 )
Payment on capital leases (475 ) (404 ) Convertible preferred stock
redeemed (9,191 ) 0 Convertible preferred stock dividends paid (875
) 0 Taxes paid related to net-share settlement of equity awards (81
) 0
Net cash provided by financing activities 526
4,235
Decrease in cash and cash equivalents (251 )
(1,115 ) Cash and cash equivalents, beginning of period 626 7,406
Cash and cash equivalents, end of period $ 375 $ 6,291
Supplemental disclosures of cash flow information
Noncash investing and financing transactions: Property and
equipment financed with capital leases $ 718 $ 393 Interest paid $
729 $ 409 Financed insurance premium $ 0 $ 2,135
LIMBACH HOLDINGS, INC. Condensed
Consolidated Statements of Operations (Unaudited)
Three months ended March 31,
Increase/(Decrease) (in thousands, except for percentages)
2018 2017 $ % Revenue
Construction $ 96,810 $ 91,465 5,345 5.8 % Service 23,739 23,725 14
0.0 % Total revenue 120,549 115,190 5,359 4.7 % Gross
profit: Construction 9,271 8,949 322 3.6 % Service 4,016 4,820 (804
) -16.7 % Total gross profit 13,287 13,769 (482 ) -3.5 %
Selling, general and administrative expenses: Construction 7,866
7,281 585 8.0 % Service 4,019 3,451 568 16.5 % Corporate 3,781
3,835 (54
)
-1.4 % Total selling, general and administrative expenses 15,666
14,567 1,099 7.5 % Amortization of intangibles (Corporate)
335 1,008 (673 ) -66.8 % Operating income (loss):
Construction 1,405 1,668 (263 ) -15.8 % Service (3 ) 1,369 (1,372 )
-100.2 % Corporate (4,116 ) (4,843 ) 727 15.0 % Operating income
(loss) $ (2,714 ) $ (1,806 ) (908 ) -50.3 %
* 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 Loss
Three months ended March 31,
(in thousands)
2018 2017 Net loss $ (2,424 ) $
(1,214 ) Adjustments: Depreciation and amortization 1,371
2,646 Interest expense 769 454 Non-cash Stock-based compensation
expense 467 0 Income tax benefit (1,043 ) (1,083 ) Adjusted EBITDA
$ (860 ) $ 803
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: https://www.businesswire.com/news/home/20180515006636/en/
Investor Relations:The Equity Group Inc.Jeremy Hellman,
CFA, (212) 836-9626Senior Associatejhellman@equityny.comorLimbach
Holdings, Inc.John T. Jordan, Jr., (301) 623-4799Executive Vice
President and Chief Financial Officerjohn.jordan@limbachinc.com
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