LIMBACH HOLDINGS, INC. REPORTS SECOND QUARTER 2021 RESULTS

LIMBACH HOLDINGS, INC. REPORTS SECOND QUARTER 2021 RESULTS

LIMBACH HOLDINGS, INC. REPORTS SECOND QUARTER 2021 RESULTS 150 150 Limbach Holdings, Inc

Consolidated Revenue of $121.0 Million Driven by Continued Growth in Owner Direct Relationships Segment

Gross Margins Improved to 15.4%; Diluted EPS of $0.07

Conference Call Scheduled for 9:00 am ET on August 13, 2021

PITTSBURGH–(BUSINESS WIRE)– Limbach Holdings, Inc. (Nasdaq: LMB) today announced its financial results for the quarter ended June 30, 2021. Consolidated revenue improved to $121.0 million, or 6.8%, compared with the first quarter of 2021 as business conditions strengthened relative to the first quarter of 2021. ODR(1) segment revenue accounted for 27.7% of consolidated revenue in the second quarter of 2021 compared to 21.6% in the second quarter of 2020. Consolidated gross margin of 15.4% increased 24 basis points sequentially, and 40 basis points year-over-year as a result of a shift in mix to the ODR segment, which provides for higher gross margins, as well as better overall execution. In the second quarter of 2021, the ODR segment accounted for more than 50% of consolidated gross profit.

Charlie Bacon, Limbach’s President and Chief Executive Officer, said, “Our second quarter reflected steady improvement in activity levels from the first quarter as business and economic conditions improved. We’re pleased with the sequential and year-over-year growth in ODR revenue and the continued strength of ODR margins, both of which have been key objectives. In the GCR segment, substantially all of the work required to meet our current year total revenue guidance is in backlog and promised work from customer commitments not yet contracted. In our ODR segment, much of the work required to meet our current year total revenue guidance is included in backlog, promised work from customer commitments not yet contracted, our maintenance base, and expected related pull through work. We also continue to see an improving pipeline of opportunities as our customers accelerate their capital spending tied to the reopening and expanding economy.”

Mr. Bacon continued, “Our ODR revenue growth is expected to exceed historical rates. However, that growth, while substantial and expected to be in excess of 25% for the year, will fall slightly short of our original expectation. GCR revenue is tracking ahead of plan due to strong sales in the second quarter of 2021, but given the lower margins in that segment and our expectation for selling, general and administrative expense to continue as planned based on the investments into the ODR segment, we are tightening our Adjusted EBITDA guidance range to $23 million to $25 million for 2021 based on the likely mix between GCR and ODR revenue. Based on our current backlog, opportunities in hand, and our work schedules for the second half of 2021, we are tightening our revenue guidance range to $480 million to $510 million. We remain cautiously optimistic about the balance of 2021 despite the emergence of the Delta Variant of COVID-19 becoming more prevalent within the areas we operate. Due to this uncertainty, we are currently not able to forecast any additional impacts from the pandemic during the second half of 2021.”

Mr. Bacon concluded, “We have noted that 2021 would be a year of transition for Limbach and I am pleased to report that this process is underway. As we look forward to the second half of 2021, our projections show the ODR segment contributing as much as 30% of our consolidated revenue for the year, helping us drive gross margin improvement of up to 150 basis points. ODR revenue drives higher margins, and our stated goal has been to continuously drive a greater mix of our total revenue towards this segment.”

(1)As of January 1, 2021, the Company renamed its existing two reportable segments to reflect our two distinct approaches to our customer base and to better align with our owner direct strategy. The previously named Construction Segment is now known as General Contractor Relationships (“GCR”) and the previously named Service Segment is now known as Owner Direct Relationships (“ODR”).

The following are results for the three months ended June 30, 2021 compared to the three months ended June 30, 2020:

  • Consolidated revenue was $121.0 million for the second quarter of 2021, a decrease of 10.5% from the second quarter of 2020 revenue of $135.2 million. GCR segment revenue of $87.6 million was down 17.4%, while ODR segment revenue of $33.5 million increased by $4.2 million, or 14.4%.
  • Gross margin increased to 15.4% for the second quarter of 2021, up from 15.0% for the second quarter of 2020. This increase was mainly driven by the mix of higher margin ODR segment work. GCR gross profit decreased $3.3 million, or 27.2%, largely due to lower revenue at reduced margins. ODR gross profit increased $1.7 million, or 20.7%, due to an increase in revenue at higher margins. On a dollar basis, total gross profit was $18.7 million for the second quarter of 2021, compared to $20.3 million for the second quarter of 2020.
  • Selling, general and administrative expenses increased by approximately $3.5 million, to $17.2 million, during the second quarter of 2021 as compared to $13.8 million during the second quarter of 2020. This increase is characterized by lower operating expenses resulting from pandemic-driven operational reductions in the second quarter of 2020 and our investment in ODR expansion in 2021, such as the focus on sales resources in the ODR segment and the opening of our new Nashville office in 2021 in order to attract additional healthcare ODR business. As a percent of revenue, selling, general and administrative expenses were 14.2% for the second quarter of 2021, up from 10.2% for the second quarter of 2020. Second quarter 2021 selling, general and administrative expenses were consistent with levels reported during the first quarter of 2021.
  • Interest expense, net was $0.5 million for the second quarter of 2021 compared to $2.1 million for the second quarter of 2020. This significant decrease was due to the Company’s refinancing of its 2019 debt facilities in February 2021, replacing them with debt facilities that carry a lower cost of financing, as well as a lower overall level of indebtedness.
  • Net income for the second quarter of 2021 was $0.7 million as compared to $2.9 million for the second quarter of 2020. Diluted income per share was $0.07 for the second quarter of 2021 as compared to $0.37 for the second quarter of 2020. Second quarter 2020 net income benefited significantly from unusually low selling, general and administrative expenses, as previously noted, and an unexpected high margin emergency COVID-19 response project and the resulting income contribution.
  • Adjusted EBITDA for the second quarter of 2021 was $3.6 million as compared to $8.1 million for the second quarter of 2020, a decrease of 55.6%. The decrease in Adjusted EBITDA was primarily attributable to the $3.5 million increase in selling, general and administrative expenses during the second quarter of 2021, most of which was incurred to fund our ODR expansion, coupled with lower GCR segment gross profit as compared to the second quarter of 2020 and the absence of an unexpected high margin emergency COVID-19 response project which benefited the prior year period, as previously noted.
  • Net cash used in operating activities was $7.2 million for the second quarter of 2021, as compared to net cash provided by operating activities of $18.9 million for the second quarter of 2020. Cash flows used in operating activities during the second quarter of 2021 were negatively affected primarily due to an increase in accounts receivable due to the timing of billings and collections, a decrease in accrued expenses and other current liabilities primarily due to timing of payments, and a decrease in our overbilled position due to the reduction in GCR revenue in 2021 and the timing of contract billings and the recognition of contract revenue, offset by an increase in accounts payable, including retainage, as compared to the second quarter of 2020.

Balance Sheet and Backlog

At June 30, 2021, the Company had current assets of $199.7 million and current liabilities of $137.9 million, representing a current ratio of 1.45x. As of December 31, 2020, the Company’s current ratio was 1.33x. Working capital was $61.8 million at June 30, 2021, an increase of $12.7 million from December 31, 2020. At June 30, 2021, the Company had no borrowings against its revolving credit facility, other than for standby letters of credit totaling $3.4 million, and carried a term loan balance of $28.0 million.

Total backlog at June 30, 2021 was $439.5 million as compared to $444.4 million as of December 31, 2020. At June 30, 2021, GCR and ODR segment backlog accounted for $378.9 and $60.6 million of that consolidated total, respectively.

2021 Guidance

The Company is revising its guidance for 2021 as follows:

Current

Previous

Revenue

$480 million – $510 million

$480 million – $520 million

Adjusted EBITDA

$23 million – $25 million

$23 million – $27 million

With respect to projected 2021 Adjusted EBITDA, a quantitative reconciliation is not available without unreasonable effort due to the high variability, complexity and low visibility with respect to taxes and other items, which are excluded from Adjusted EBITDA. The Company expects the variability of this item to have a potentially unpredictable, and potentially significant, impact on future GAAP financial results.

Conference Call Details

Date:

Friday, August 13, 2021

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/46045/indexl.html. An audio replay of the call will be archived on the Company’s website for 365 days.

About Limbach

Limbach is an integrated building systems solutions firm whose expertise is in the design, modular prefabrication, installation, management and maintenance of heating, ventilation, air-conditioning (“HVAC”), mechanical, electrical, plumbing and controls systems. Our market sectors primarily include the following: healthcare, life sciences, data centers, industrial and light manufacturing, entertainment, education and government. With 22 offices throughout the United States and Limbach’s full life-cycle capabilities, from concept design and engineering through system commissioning and recurring 24/7 service and maintenance, Limbach is positioned 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 impact of the COVID-19 pandemic on the construction industry in the first quarter and future periods, timing of the recognition of backlog as revenue, the potential for recovery of cost overruns, and the ability of the Company to successfully remedy the issues that have led to write-downs in various business units. These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target” or similar expressions. These forward-looking statements are based on information available to us as of the date they were made and involve a number of risks and uncertainties which may cause them to turn out to be wrong. Some of these risks and uncertainties may in the future be amplified by the COVID-19 outbreak and there may be additional risks that we consider immaterial or which are unknown. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Please refer to our most recent annual report on Form 10-K, as well as our subsequent filings on Form 10-Q and Form 8-K, which are available on the SEC’s website (www.sec.gov), for a full discussion of the risks and other factors that may impact any forward-looking statements in this press release.

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30

(in thousands, except share and per share data)

2021

2020

2021

2020

Revenue

$

121,019

$

135,185

$

234,363

$

273,957

Cost of revenue

102,329

114,850

198,444

235,398

Gross profit

18,690

20,335

35,919

38,559

Operating expenses:

Selling, general and administrative

17,232

13,752

34,377

30,552

Amortization of intangibles

104

274

208

417

Total operating expenses

17,336

14,026

34,585

30,969

Operating income

1,354

6,309

1,334

7,590

Other income (expenses):

Interest expense, net

(452)

(2,137)

(1,716)

(4,295)

Gain (loss) on disposition of property and equipment

94

(13)

8

17

Loss on early debt extinguishment

(1,961)

Gain (loss) on change in fair value of warrant liability

(102)

14

59

Total other expenses

(358)

(2,252)

(3,655)

(4,219)

Income (loss) before income taxes

996

4,057

(2,321)

3,371

Income tax provision (benefit)

264

1,110

(771)

476

Net income (loss)

$

732

$

2,947

$

(1,550)

$

2,895

Earnings Per Share (“EPS”)

Income (loss) per common share:

Basic

$

0.07

$

0.38

$

(0.16)

$

0.37

Diluted

$

0.07

$

0.37

$

(0.16)

$

0.37

Weighted average number of shares outstanding:

Basic

10,251,696

7,845,515

9,737,801

7,821,594

Diluted

10,469,028

7,905,368

9,737,801

7,878,246

LIMBACH HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)

June 30,
2021

December 31,
2020

ASSETS

Current assets

Cash and cash equivalents

$

27,693

$

42,147

Restricted cash

113

113

Accounts receivable, net

94,615

85,767

Contract assets

70,815

67,098

Income tax receivable

891

Other current assets

5,599

4,292

Total current assets

199,726

199,417

Property and equipment, net

17,433

19,700

Intangible assets, net

11,473

11,681

Goodwill

6,129

6,129

Operating lease right-of-use assets

16,852

18,751

Deferred tax asset

6,393

6,087

Other assets

283

392

Total assets

$

258,289

$

262,157

LIABILITIES

Current liabilities

Current portion of long-term debt

$

8,454

$

6,536

Current operating lease liabilities

4,122

3,929

Accounts payable, including retainage

66,954

66,763

Contract liabilities

39,179

46,648

Accrued income taxes

1,671

Accrued expenses and other current liabilities

19,215

24,747

Total current liabilities

137,924

150,294

Long-term debt

24,721

36,513

Long-term operating lease liabilities

13,454

15,459

Other long-term liabilities

4,031

6,159

Total liabilities

180,130

208,425

Commitments and contingencies

STOCKHOLDERS’ EQUITY

Common stock, $0.0001 par value; 100,000,000 shares authorized, 10,251,696 issued and outstanding at June 30, 2021 and 7,926,137 at December 31, 2020

1

1

Additional paid-in capital

83,589

57,612

Accumulated deficit

(5,431)

(3,881)

Total stockholders’ equity

78,159

53,732

Total liabilities and stockholders’ equity

$

258,289

$

262,157

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six months ended June 30,

(in thousands)

2021

2020

Cash flows from operating activities:

Net (loss) income

$

(1,550)

$

2,895

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

Depreciation and amortization

2,964

3,140

Provision for doubtful accounts

70

27

Stock-based compensation expense

1,313

435

Noncash operating lease expense

2,091

2,025

Amortization of debt issuance costs

220

1,080

Deferred income tax provision

(306)

798

Gain on sale of property and equipment

(8)

(17)

Loss on early debt extinguishment

1,961

Gain on change in fair value of warrant liability

(14)

(59)

Changes in operating assets and liabilities:

Accounts receivable

(8,918)

3,588

Contract assets

(3,717)

4,901

Other current assets

(1,306)

(166)

Accounts payable, including retainage

190

(19,519)

Prepaid income taxes

(891)

(171)

Accrued taxes payable

(1,671

(11)

Contract liabilities

(7,469

16,254

Operating lease liabilities

(2,004)

(2,399)

Accrued expenses and other current liabilities

(5,450)

9,419

Other long-term liabilities

(114)

237

Net cash (used in) provided by operating activities

(24,609)

22,457

Cash flows from investing activities:

Proceeds from sale of property and equipment

361

64

Advances (to) from joint ventures

(1)

Purchase of property and equipment

(501)

(660)

Net cash used in investing activities

$

(140)

$

(597)

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)

Six months ended June 30,

(in thousands)

2021

2020

Cash flows from financing activities:

Proceeds from Wintrust Term Loan

$

30,000

$

Payments on Wintrust Term Loan

(2,000)

Proceeds from 2019 Revolving Credit Facility

7,250

Payments on 2019 Revolving Credit Facility

(7,250)

Payments on 2019 Refinancing Term Loan

(39,000)

Prepayment penalty and other costs associated with early debt extinguishment

(1,376)

Proceeds from the sale of common stock

22,773

Proceeds from the exercise of warrants

1,989

Payments on finance leases

(1,318)

(1,285)

Payments of debt issuance costs

(593)

Taxes paid related to net-share settlement of equity awards

(401)

(90)

Proceeds from contributions to Employee Stock Purchase Plan

221

Net cash provided by (used in) financing activities

10,295)

(1,375)

(Decrease) increase in cash, cash equivalents and restricted cash

(14,454)

20,485

Cash, cash equivalents and restricted cash, beginning of period

42,260

8,457

Cash, cash equivalents and restricted cash, end of period

$

27,806

$

28,942

Supplemental disclosures of cash flow information

Noncash investing and financing transactions:

Right of use assets obtained in exchange for new operating lease liabilities

$

156

$

Right of use assets obtained in exchange for new finance lease liabilities

336

1,050

Right of use assets disposed or adjusted modifying operating lease liabilities

36

586

Right of use assets disposed or adjusted modifying finance lease liabilities

(64)

Interest paid

1,741

3,250

Cash paid for income taxes

$

2,096

$

734

LIMBACH HOLDINGS, INC.

Condensed Consolidated Segment Operating Results

(Unaudited)

Three months ended June 30,

Increase/(Decrease)

(in thousands, except for percentages)

2021

2020

$

%

Statement of Operations Data:

Revenue:

GCR

$

87,550

$

105,937

$

(18,387)

(17.4)

%

ODR

33,469

29,248

4,221

14.4

Total revenue

121,019

135,185

(14,166)

(10.5)

%

Gross profit:

GCR

8,885

12,213

(3,328)

(27.2)

%

ODR

9,805

8,122

1,683

20.7

%

Total gross profit(1)

18,690

20,335

(1,645)

(8.1)

%

Selling, general and administrative:

GCR

9,070

8,024

1,046

13.0

%

ODR

7,526

5,588

1,938

34.7

%

Corporate

636

140

496

354.3

%

Total selling, general and administrative

17,232

13,752

3,480

25.3

%

Amortization of intangibles (Corporate)

104

274

(170)

(62.0)

%

Total operating income

$

1,354

$

6,309

$

(4,955)

(78.5)

%

(1)

Total gross profit as a percentage of consolidated total revenue was 15.4% and 15.0% for the three months ended June 30, 2021 and 2020, respectively.

LIMBACH HOLDINGS, INC.

Condensed Consolidated Segment Operating Results (Continued)

(Unaudited)

Six months ended June 30,

Increase/(Decrease)

(in thousands, except for percentages)

2021

2020

$

%

Statement of Operations Data:

Revenue:

GCR

$

172,354

$

215,423

$

(43,069)

(20.0)

%

ODR

62,009

58,534

3,475

5.9

%

Total revenue

234,363

273,957

(39,594)

(14.5)

%

Gross profit:

GCR

18,280

23,195

(4,915)

(21.2)

%

ODR

17,639

15,364

2,275

14.8

%

Total gross profit(1)

35,919

38,559

(2,640)

(6.8)

%

Selling, general and administrative:

GCR

18,184

18,200

(16)

(0.1)

%

ODR

14,880

11,917

2,963

24.9

%

Corporate

1,313

435

878

201.8

%

Total selling, general and administrative

34,377

30,552

3,825

12.5

%

Amortization of intangibles (Corporate)

208

417

(209)

(50.1)

%

Total operating income

$

1,334

$

7,590

$

(6,256)

(82.4)

%

(1)

Total gross profit as a percentage of consolidated total revenue was 15.3% and 14.1% for the six months ended June 30, 2021 and 2020, respectively.

Non-GAAP Financial Measures

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 net income (loss) to Adjusted EBITDA, the most comparable GAAP measure, is provided below.

We refer to our estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue we have recognized under such contracts, as “backlog.” Backlog includes unexercised contract options.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Three months ended
June 30,

Six months ended
June 30,

(in thousands)

2021

2020

2021

2020

Net income (loss)

$

732

$

2,947

$

(1,550)

$

2,895

Adjustments:

Depreciation and amortization

1,469

1,636

2,964

3,140

Interest expense, net

452

2,137

1,716

4,295

Non-cash stock-based compensation expense

636

140

1,313

435

Loss on early debt extinguishment

1,961

Change in fair value of warrants

102

(14)

(59)

Severance expense

622

Income tax provision (benefit)

264

1,110

(771)

476

Adjusted EBITDA

$

3,553

$

8,072

$

5,619

$

11,804

 

 

Investor Relations
The Equity Group, Inc.
Jeremy Hellman, CFA
Vice President
(212) 836-9626 / jhellman@equityny.com
or
Limbach Holdings, Inc.
S. Mathew Katz
Executive Vice President
(212) 201-7006 / matt.katz@limbachinc.com

Source: Limbach Holdings, Inc.