Compared to Prior Year, Q4 2018 Revenues up
15.2% and FY 2018 Revenues up 12.5%; Aggregate Backlog of
$559.7 million at Year End
Conference Call Scheduled for 9:00 am ET
Tuesday April 16, 2019
Limbach Holdings, Inc. (Nasdaq: LMB) (“Limbach” or the
“Company”) today announced its financial results for the quarter
and year ended December 31, 2018. Total fourth quarter 2018
revenues increased 15.2% from the prior year period to $151.4
million. FY 2018 revenues increased 12.5% from the prior year to
$546.5 million.
The following are other key financial highlights of FY 2018:
- Construction segment revenue increased
12.0% compared to the prior year to $438.2 million, primarily
resulting from continued strong activity in the New England,
Florida, Southern California and Ohio regions, which was partially
offset by declines in the Michigan and Western Pennsylvania
regions.
- Service segment revenue increased 14.8%
compared to the prior year to $108.3 million, resulting from growth
in the Florida, Mid-Atlantic, Michigan and Eastern Pennsylvania
regions, which was partially offset by a decline in the Southern
California region.
- Gross margin was 10.9%, compared with
13.5% in the prior year. The decrease was caused primarily by $16.0
million of net project-related write downs in the Company’s
Mid-Atlantic region. Excluding the impact of the Mid-Atlantic
region’s full year 2018 results, gross margin would have been
15.2%.
- Selling, general and administrative
(“SG&A”) expenses totaled $57.1 million in 2018, up from $56.0
million in 2017. As a percentage of revenues, full year SG&A
expenses were 10.4% in 2018, compared with 11.5% in 2017.
- Net loss attributable to the Company’s
common stockholders was $4.0 million, compared with $0.9 million
for the prior year.
- Aggregate backlog at December 31, 2018
was $559.7 million, compared with $461.4 million at December 31,
2017. Backlog at December 31, 2018 consisted of $505.5 million of
Construction segment work and $54.2 million of Service segment
work. The Company expects approximately 60.1% of current
Construction backlog to be recognized as revenue in the current
fiscal year.
- Subsequent to year-end, on April 12,
2019, the Company refinanced its prior outstanding indebtedness
with a senior secured credit facility with a lending syndicate led
by Colbeck Capital Management, LLC (“Colbeck”). Key terms of the
credit facility include:
- $40 million term loan, fully-drawn at
closing;
- $25 million delayed draw term loan to
support future acquisitions;
- Interest rate of either LIBOR (with a
2.00% floor) +800 basis points (fixed spread) or a base rate (with
a 3.00% minimum) +700 basis points; and
- No amortization for 18 months, allowing
the Company to enhance cash flow.
- In connection with the senior secured
credit facility, the Company issued warrants to certain lenders
thereunder to purchase up to an aggregate of 263,314 shares of the
Company’s common stock at an exercise price of $7.63 per share, all
or a portion of which would become exercisable in the event of any
draw under the delayed draw term loan. The warrants have a
five-year term.
- In conjunction with the senior secured
credit facility, on April 12, 2019, the Company also entered into a
revolving credit facility with Citizens Bank. Key terms of the
revolving credit facility include:
- $15 million total borrowing capacity,
with $14 million available but undrawn at closing; and
- Interest rate of either LIBOR (with a
2.00% floor) +300 to 350 basis points or a base rate (with a 3.00%
minimum) +200 to 250 basis points.
Management Commentary
Charlie Bacon, CEO of Limbach, commented, “While 2018 had its
challenges, we closed the year with a solid fourth quarter,
providing us with excellent momentum going into 2019. The
challenges we faced in our Mid-Atlantic region in 2018 drove the
implementation of some important improvements throughout our entire
operations that we are confident have strengthened our business for
the long-run. Our Service segment continues to fire on all
cylinders and we are focused on expanding that segment, both in
terms of its capabilities, via deploying new technologies, and
customer base, through enhancing existing relationships with large
regional and national footprint customers while also focusing on
attracting new customers.”
Mr. Bacon concluded, “Our Construction business is also
performing well. Eight of our ten business units recorded revenue
growth in 2018, with seven of the ten delivering strong EBIT
results. We closed 2018 with record backlog of over $559 million.
We also had additional promised work of approximately $380 million
as of December 31, 2018, giving us solid revenue coverage for 2019
as well as a great jump start on our 2020 and 2021 bookings.
Lastly, our refinancing is now complete, providing us the balance
sheet to continue expanding our business. We are excited about the
road ahead.”
Fourth Quarter 2018
Summary
Revenue
Fourth quarter 2018 revenue of $151.4 million was up 15.2%
compared to $131.4 million for the prior year period, as both the
Construction and Service segments exhibited growth. Construction
segment revenue of $118.3 million was up 9.6%, while Service
segment revenue of $33.1 million was up 40.7%.
Gross Margin
Gross margin for the full year 2018 was 10.9%, compared to 13.5%
in the prior year. Service segment gross margin was 21.0%, compared
to 22.1% in the prior year. During FY 2018, Construction segment
gross margin was negatively impacted by net write downs of
approximately $13.2 million on ten projects, which includes $14.3
million of net write downs in the Mid-Atlantic region. As a result,
Construction segment gross margin was 8.4% for the full year 2018,
compared to 11.4% for the prior year. Excluding the Mid-Atlantic
region from full year 2018 results, gross margin would have been
15.2%. In addition, in 2018, one project in the Service segment
within the Mid-Atlantic region experienced a write down of $1.7
million. On a dollar basis, total gross profit for the full year
2018 was $59.4 million, compared to $65.6 million for the prior
year.
SG&A Expense
Fourth quarter 2018 SG&A expenses were $14.4 million,
compared to $15.1 million in the prior year period. The decrease in
SG&A expenses was primarily due to the absence of incentive
accruals that were incurred in the prior year period. As a
percentage of total revenue, fourth quarter 2018 SG&A expenses
accounted for 9.5%, compared to 11.5% in the prior year period,
primarily as a result of the Company’s ability to hold expenses
relatively level while revenues continued to grow.
Net Income attributable to the Company’s
common stockholders
Net income attributable to the Company’s common stockholders for
fourth quarter 2018 was $3.4 million, compared to $1.0 million in
the prior year period. Earnings per share for fourth quarter 2018
was $0.44 for both basic and diluted, compared to $0.13 basic and
$0.12 diluted in the prior year period.
Full year 2018 Summary
Revenue
For the full year 2018, revenue was $546.5 million, up 12.5%
from $485.7 million for the prior year. Construction segment
revenue of $438.2 million was up 12.0% from the prior year, while
Service segment revenues of $108.3 million were up 14.8% from the
prior year.
Gross Margin
Gross margin for the full year 2018 was 10.9%, compared to 13.5%
in the prior year. Service segment gross margin was 21.0%, compared
to 22.1% in the prior year. During FY 2018, Construction segment
gross margin was negatively impacted by net write downs of
approximately $13.2 million on ten projects, which includes $14.3
million of net write downs in the Mid-Atlantic region. As a result,
Construction segment gross margin was 8.4% for the full year 2018,
compared to 11.4% for the prior year. Excluding the Mid-Atlantic
region from full year 2018 results, gross margin would have been
15.2%. In addition, in 2018, one project in the Service segment
within the Mid-Atlantic region experienced a write down of $1.7
million. On a dollar basis, total gross profit for the full year
2018 was $59.4 million, compared to $65.6 million for the prior
year.
SG&A Expense
SG&A expense for the full year 2018 was $57.1 million,
compared to $56.0 million in the prior year. Significant increases
in 2018 SG&A expense included a $2.6 million increase in salary
and benefit expenses related to increased staffing at multiple
locations and additional leased properties, which contributed $1.2
million of added SG&A expense. The increase was offset by a
$3.2 million reduction in incentive compensation expense and a $1.5
million reduction in professional fees. As a percentage of total
revenue, SG&A expense for the full year 2018 accounted for
10.4%, compared to 11.5% in the prior year.
Net Loss attributable to the Company’s
common stockholders
Net loss attributable to the Company’s common stockholders for
the full year 2018 was $4.0 million, compared to net loss of $0.9
million in the prior year. Net loss per share for the full year
2018 was $0.52 for both basic and diluted, compared to $0.13 for
both basic and diluted for the prior year.
Backlog
Aggregate backlog at December 31, 2018 was $559.7 million,
compared to $461.4 million at December 31, 2017. Backlog at
December 31, 2018 consisted of $505.5 million of Construction
segment work and $54.2 million of Service segment work. The Company
expects approximately 60.1% of current, Construction backlog to be
recognized as revenue in 2019.
Balance Sheet and Refinancing
Subsequent to year-end, on April 12, 2019, the Company
refinanced its outstanding indebtedness with a new senior secured
credit facility with a lending syndicate led by Colbeck. Maturing
on April 12, 2023, subject to adjustment, the new facility has a
total capacity of $65 million, $40 million of which is a term loan
that was drawn at closing and $25 million of which comprises a
delayed-draw term loan to support acquisitions, which is currently
undrawn. The new facility has an interest rate of either LIBOR
(with a 2.00% floor) plus 800 basis points (fixed spread) or a base
rate (with a 3.00% minimum) plus 700 basis points and no
amortization payments for 18 months, allowing the Company to
enhance its near-term cash flow. In connection with the senior
secured credit facility, the Company issued warrants to certain
lenders thereunder to purchase up to an aggregate of 263,314 shares
of the Company’s common stock at an exercise price of $7.63 per
share, all or a portion of which would become exercisable in the
event of any draw under the delayed draw term loan. The warrants
have a five-year term.
In conjunction with the senior secured credit facility noted
above, the Company entered into a three-year revolving credit
facility with Citizens Bank. Citizens Bank was a member of the bank
group whose debt was retired with the proceeds of the new senior
credit facility. The revolver has $15 million of total borrowing
capacity with $14 million available which is undrawn. The senior
secured credit facility provided excess cash which, when combined
with the revolver, provides adequate liquidity and working capital
to support the Company’s operations. The revolver interest rate is
either LIBOR (with a 2.00% floor) plus 300 to 350 basis points or a
base rate (with a 3.00% minimum) plus 200 to 250 basis points.
Conference Call Details
Date: Tuesday, April 16, 2019 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:
https://78449.themediaframe.com/dataconf/productusers/lmb/mediaframe/26937/indexl.html.
An audio replay of the call will be archived on the Company’s
website for 365 days.
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, backlog, capital
expenditures or other future financial or business performance or
strategies, results of operations or financial condition, and in
particular statements regarding the timing of the recognition of
backlog as revenue, the potential for recovery of cost overruns,
the ability of the Company to successfully remedy the issues that
have led to write-downs in its Mid-Atlantic branch, and the
benefits expected by the Company’s new senior secured credit
facility and revolving credit facility. 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, 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. Consolidated Statements of
Operations (Unaudited) Three months ended
December 31, (in thousands, except share data and per share
data)
2018 2017 Revenue $ 151,384 $ 131,412
Cost of revenue 131,727 110,506 Gross profit 19,657 20,906
Operating expenses: Selling, general and administrative expenses
14,414 15,060 Amortization of intangibles 297 751 Total operating
expenses 14,711 15,811 Operating income 4,946 5,095 Other income
(expenses): Interest expense, net (951) (472) Loss on debt
modification (335) 0 Gain on sale of property and equipment 15 9
Total other expenses (1,271) (463) Income before income taxes 3,675
4,632 Income tax provision 301 3,503 Net income 3,374 1,129
Dividends on cumulative redeemable convertible preferred stock 0
179 Net income attributable to Limbach Holdings, Inc. common
stockholders $ 3,374 $ 950
Earnings Per Share
("EPS")
Net income per share attributable to common stockholders: Basic $
0.44 $ 0.13 Diluted $ 0.44 $ 0.12 Weighted average number of shares
outstanding: Basic 7,591,195 7,504,293 Diluted 7,632,373 8,069,682
LIMBACH HOLDINGS, INC. Consolidated
Statements of Operations For the years ended December
31, (in thousands, except share data and per share data)
2018 2017 Revenue $ 546,526 $ 485,739 Cost of
revenue 487,095 420,116 Gross profit 59,431 65,623 Operating
expenses: Selling, general and administrative expenses 57,089
56,023 Amortization of intangibles 1,272 3,582 Total operating
expenses 58,361 59,605 Operating income 1,070 6,018 Other income
(expenses): Interest expense, net (3,305) (2,034) Loss on debt
modification (335) 0 Gain (loss) on sale of property and equipment
90 (121) Total other expenses (3,550) (2,155) Income (loss) before
income taxes (2,480) 3,863 Income tax provision (benefit) (635)
3,151 Net income (loss) (1,845) 712 Dividends on cumulative
redeemable convertible preferred stock (113) 809 Premium paid on
redemption of redeemable convertible preferred stock 2,219 847 Net
loss attributable to Limbach Holdings, Inc. common stockholders $
(3,951) $ (944)
Earnings Per Share
("EPS")
Net loss per share attributable to common stockholders: Basic $
(0.52) $ (0.13) Diluted $ (0.52) $ (0.13) Weighted average number
of shares outstanding: Basic 7,562,586 7,471,371 Diluted 7,562,586
7,471,371
LIMBACH HOLDINGS, INC.
Consolidated Balance Sheets (in thousands, except
share data)
December 31, 2018 December 31, 2017
ASSETS Current assets: Cash and cash
equivalents $ 1,619 $ 626 Restricted cash 113 113 Accounts
receivable, net 135,687 129,343 Costs and estimated earnings in
excess of billings on uncompleted contracts 32,698 33,006 Advances
to and equity in joint ventures, net 12 11 Other current assets
34,857 3,161
Total current assets 204,986 166,260 Property
and equipment, net 20,527 17,918 Intangible assets, net 12,953
14,225 Goodwill 10,488 10,488 Deferred tax asset 4,409 3,664 Other
assets 271 465
Total assets $ 253,634 $ 213,020
LIABILITIES Current liabilities: Current portion of
long-term debt $ 3,141 $ 6,358 Accounts payable, including
retainage 74,353 67,438 Billing in excess of costs and estimated
earnings on uncompleted contracts 50,843 28,543 Accrued income
taxes 0 2,220 Accrued expenses and other current liabilities 53,801
30,925
Total current liabilities 182,138 135,484 Long-term
debt 23.614 20,556 Other long-term liabilities 1,514 861
Total
liabilities 207,266 156,901 Commitments and contingencies
Redeemable convertible preferred stock,
net, par value of $0.0001,1,000,000 shares authorized, no shares
issued and outstanding at December31, 2018 and 280,000 issued and
outstanding at December 31, 2017 ($0 and$7,853 redemption value as
of December 31, 2018 and December 31, 2017, respectively)
0 7,959
STOCKHOLDERS' EQUITY
Common stock, par value $0.0001,
100,000,000 shares authorized;7,592,911 issued and outstanding at
December 31, 2018 and 7,504,133 atDecember 31, 2017
1 1 Additional paid-in capital 54,791 54,738 Accumulated deficit
(8,424) (6,579)
Total stockholders' equity 46,368 48,160
Total liabilities and stockholders' equity $ 253,634 $
213,020
LIMBACH HOLDINGS, INC. Consolidated
Statements of Cash Flows For the years ended December
31, (in thousands)
2018 2017 Cash flows
from operating activities: Net income (loss) $ (1,845) $ 712
Adjustments to reconcile net income (loss) to cash provided by
(used in) operating activities: Depreciation and amortization 5,683
9,118 Provision for doubtful accounts 64 259 Stock-based
compensation expense 2,159 1,656 Loss on debt modification 335 0
Amortization of debt issuance costs 373 181 Deferred income tax
provision (benefit) (745) 603 Accretion of preferred stock discount
to redemption value 0 21 (Gain) loss on sale of property and
equipment (90) 121 Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (6,408) (15,630)
(Increase) decrease in costs and estimated
earnings in excess of billings on uncompleted contracts
308 (1,046) (Increase) decrease in other current assets (31,162)
698 (Increase) decrease in other assets 0 1 Increase (decrease) in
accounts payable 6,914 10,404
Increase (decrease) in billings in excess
of costs and estimated earnings on uncompleted contracts
22,301 (10,647) Increase (decrease) in taxes (2,753) 2,220 Increase
(decrease) in accrued expenses and other current liabilities 29,535
(2,780) Increase (decrease) in other long-term liabilities 653
44
Net cash provided by (used in) operating
activities 25,322 (4,065)
Cash flows from investing
activities: Proceeds from sale of property and equipment 198 70
Advances to joint ventures (1) (1) Purchase of property and
equipment (3,877) (3,303)
Net cash used in investing
activities (3,680) (3,234)
LIMBACH
HOLDINGS, INC. Consolidated Statements of Cash Flows
(continued) Cash flows from financing
activities: Increase (decrease) in bank overdrafts (6,446)
7,780 Payments on Credit Agreement term loan (3,300) (4,865)
Proceeds from Credit Agreement revolver 109,650 111,562 Payments on
Credit Agreement revolver (115,308) (105,904) Payments on term loan
0 (33) Proceeds from Bridge Term Loan 10,000 0 Payments on Bridge
Term Loan (2,264) 0 Payments on financed insurance premium 0
(2,135) Payments on capital leases (1,939) (1,690) Convertible
preferred stock redeemed (9,191) (3,847) Convertible preferred
stock dividends paid (875) (245) Taxes paid related to net-share
settlement of equity awards (211) (104) Debt issuance costs (765) 0
Net cash provided by (used in) financing activities (20,649)
519
Increase (decrease) in cash and cash equivalents 993
(6,780) Cash and cash equivalents, beginning of year 626 7,406 Cash
and cash equivalents, end of year $ 1,619 $ 626
Supplemental
disclosures of cash flow information Noncash investing and
financing transactions: Property and equipment financed with
capital leases $ 3,260 $ 1,801 Financed insurance premium $ 0 $
2,135 Interest paid $ 2,714 $ 1,882
LIMBACH
HOLDINGS, INC Consolidated Statements of
Operations (Unaudited) Three months ended December
31, Increase/(Decrease) (in thousands, except for
percentages)
2018 2017 $ %
Revenue Construction $ 118,295
$ 107,899 10,396 9.6% Service 33,089 23,513 9,576 40.7% Total
revenue 151,384 131,412 19,972 15.2% Gross profit:
Construction 12,983 14,793 (1,810) -12.2% Service 6,674 6,113 561
9.2% Total gross profit 19,657 20,906 (1,249) -6.0% Selling,
general and administrative expenses: Construction 4,527 6,916
(2,389) -34.5% Service 3,487 3,341 146 4.4% Corporate 6,400 4,803
1,597 33.3% Total selling, general and administrative expenses
14,414
15,060
(646) -4.3% Amortization of intangibles (Corporate) 297 751
(454) -60.5% Operating income (loss): Construction 8,456
7,877 579 7.4% Service 3,187 2,772 415 15.0% Corporate (6,697)
(5,554)
(1,143)
-20.6% Operating income: $ 4,946 $ 5,095 (149) -2.9%
LIMBACH HOLDINGS, INC Consolidated Statements of
Operations For the years ended December 31,
Increase/(Decrease) (in thousands, except for
percentages)
2018 2017 $ %
Revenue Construction $ 438,229
$ 391,364 46,865 12.0% Service 108,297 94,375 13,922 14.8% Total
revenue 546,526 485,739 60,787 12.5% Gross profit:
Construction 36,721 44,790 (8,069) -18.0% Service 22,710 20,833
1,877 9.0% Total gross profit 59,431 65,623 (6,192) -9.4%
Selling, general and administrative expenses: Construction 27,307
25,764 1,543 6.0% Service 15,003 13,888 1,115 8.0% Corporate 14,779
16,371 (1,592) -9.7% Total selling, general and administrative
expenses 57,089
56,023
1,066 1.9% Amortization of intangibles (Corporate) 1,272
3,582 (2,310) -64.5% Operating income (loss): Construction
9,414 19,026 (9,612) -50.5% Service 7,707 6,945 762 11.0% Corporate
(16,051) (19,953)
3,902
19.6% Operating income (loss) $ 1,070 $ 6,018 (4,948) -82.2%
Non-GAAP Financial
Measure
In assessing the performance of our business, management
utilizes a variety of financial and performance measures. The key
measure is Adjusted EBITDA, 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
Net income (loss) to Adjusted EBITDA
Three months ended
December 31,
For the years ended
December 31,
(in thousands)
2018 2017 2018 2017 Net
income (loss) $ 3,374 $ 1,129 $ (1,845) $ 712 Adjustments:
Depreciation and amortization 1,467 1,735 5,683 9,118 Interest
expense 950 472 3,305 2,034 Loss on debt modification 335 -- 335 --
Non-cash stock-based compensation expense 496 739 2,159 1,656
Income tax provision (benefit) 301 3,503 (635) 3,151 Adjusted
EBITDA $ 6,923 $ 7,578 $ 9,002 $ 16,671
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190415005787/en/
Investor Relations:The Equity Group Inc.Jeremy Hellman,
CFASenior Associate(212) 836-9626 / jhellman@equityny.comOrLimbach
Holdings, Inc.John T. Jordan, Jr.Executive Vice President and Chief
Financial Officer(301) 623-4799 / john.jordan@limbachinc.com
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