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Limbach Holdings Reports Fiscal Year 2019 Results

Fiscal Year 2019 Revenue Increase 1.2%; Gross Margin Expands 210 Basis Points to 13.0%; Net Loss of $1.8 million; Adjusted EBITDA of $16.8 million

Conference Call Scheduled for 9:00 am ET on May 13, 2020

PITTSBURGH--(BUSINESS WIRE)-- Limbach Holdings, Inc. (Nasdaq: LMB) (“Limbach” or the “Company”) today announced its financial results for the year ended December 31, 2019. Revenue for the full fiscal year increased 1.2% from the prior year period to $553.3 million. Improved overall execution drove the gross margin to 13.0%, resulting in an 86% improvement in full year Adjusted EBITDA.

Charlie Bacon, Limbach’s President and Chief Executive Officer, said, “The Company’s performance in 2019 represented a substantial improvement over 2018. Last year, in nearly all of our branches, we experienced consistent execution and strong gross margins, as well as continuing progress in expanding our Service and owner-direct business. That segment presents attractive opportunities to deliver high margin, recurring revenue, special projects and retrofit projects direct to facility owners, all on an attractive risk-adjusted basis. Disappointingly, continuing challenges in the Southern California market weighed on our otherwise solid performance across the organization. Those challenging projects are nearing completion, and we continue to pursue amounts owed to us through various change orders and claims, both in Southern California and elsewhere.”

Mr. Bacon continued, “During the fourth quarter, we also took meaningful steps to further improve our performance through restructuring of the leadership team and the introduction of three core initiatives of maximizing profitability and cash flow; implementing a more stringent risk management paradigm; and continued expansion of the owner-direct strategy. These efforts have accelerated in 2020 as we also respond to the aggressive onset of the COVID-19 pandemic. While we have experienced some reduction in construction and service activity, as well as impacts to productivity, we have worked to minimize and offset those impacts in other ways, including an increase in emergency healthcare work, the implementation of an aggressive cost reduction program, and an intense focus on working capital management and liquidity. The situation continues to evolve, but we look forward to continuing our progression toward execution excellence and capitalizing upon the momentum we carried into the first quarter of 2020.”

The following are key financial highlights of fiscal year 2019:

  • Construction segment revenue of $438.2 million was flat compared to prior year revenue of $438.2 million. Operations in Florida, New England, and Eastern and Western Pennsylvania contributed to revenue growth, offset by expected, timing-driven revenue declines in Michigan and Ohio, as well as a forecasted decline in the Mid-Atlantic region.
  • Service segment revenue increased 6.3% year-over-year to $115.1 million, driven by a continuing focus on preventative maintenance sales, related pull-through work, and the expansion of owner-direct project opportunities.
  • Gross margin increased to 13.0% from 10.9% in fiscal year 2018. The increase resulted primarily from strong execution across the Company’s regions, offset by $9.9 million of net project-related write downs in the Company’s Southern California region.
  • SG&A expense in 2019 increased to $63.2 million as compared to $57.1 million in the prior year. Much of the increase was attributable to an increase in salary and benefit expenses related to increased staffing at multiple locations. Beginning in the fourth quarter of 2019, management undertook several initiatives to moderate or reverse the growth in SG&A expense which have carried forward to 2020.
  • Interest expense was $6.3 million in 2019 as compared to $3.3 million in 2018 as the Company incurred higher average debt and paid higher interest rates under new credit facilities following the closing of a refinancing on April 12, 2019.
  • Net loss attributable to the Company’s common stockholders was $1.8 million, compared with a net loss of $4.0 million in the prior year. Included in the net loss for the year ended December 31, 2019 is a charge of $4.4 million related to goodwill impairment within the Construction segment.
  • Total backlog at December 31, 2019 was $561.2 million as compared to $559.7 million as of December 31, 2018. At December 31, 2019, Construction backlog accounted for $504.2 million of the consolidated total with Service backlog accounting for $57 million.

Management Commentary

Mr. Bacon stated, “Despite the uncertainty we are facing as a Company, an industry and a nation due to the COVID-19 pandemic, I’m extremely proud of Limbach and its employees, all of whom have worked tirelessly over the last two months in responding to the challenges we confront, and in executing our tactical plans with a sense of urgency and ownership. Their continuing efforts have reinforced for our customers that we live by our Core Values and can achieve excellence in caring for our employees while also delivering innovative solutions to technical challenges, all in a continually evolving environment.”

Mr. Bacon concluded, “Despite ending 2019 with the support of a strong economy, we have confronted significant headwinds in the last several months due to the emergence and spread of COVID-19. In response, we have developed and implemented aggressive cost reduction and liquidity enhancement plans, and will continue to pursue opportunities with our customers that meet their urgent needs, particularly in the healthcare market. While it’s premature to speculate about timelines with respect to the virus and its collateral impacts, we continue to focus on near-term performance, with a particular emphasis on liquidity, and managing the business with a heightened sense of urgency. We remain committed to our long-term vision for Limbach of further integrating our design, engineering, installation and facilities maintenance capabilities, and of delivering innovative and value-added services direct to facility owners.”

Full year 2019 Summary

Revenue

For full year 2019, consolidated revenue was $553.3 million, an increase of 1.2% from prior year revenue of $546.5 million. Construction segment revenue of $438.2 million was flat year-over-year, while Service segment revenue of $115.1 million was up 6.3% from the prior year.

Gross Margin

Gross margin for the full year 2019 was 13.0% as compared to 10.9% in fiscal year 2018, an increase of 210 basis points year-over-year. On a dollar basis, total gross profit for the full year 2019 was $71.9 million compared to $59.4 million for the prior year.

In the Construction segment, gross margin increased 150 basis points as overall execution improved and the Company recorded a reduction in project write-downs as compared to 2018. Excluding the Southern California region from full year 2019 results, gross margin would have been 16.1%.

Service segment gross margin was 24.7% compared to 21.0% in fiscal 2018. The gross margin in the Service segment increased due to higher pricing across most lines of business, particularly owner-direct and special project work. The Service gross margin in 2018 was also impacted by one project within the Mid-Atlantic region which experienced a write-down of $1.7 million.

SG&A Expense

SG&A expense for the full year 2019 was $63.2 million, compared to $57.1 million in the prior year. Significant increases in 2019 SG&A expense included a $5.2 million increase in salary and benefit expenses related to increased staffing at multiple locations and a $0.8 million increase in incentive compensation year-over-year. In 2018, the Company did not accrue or pay any incentive compensation as a result of the Company’s financial performance. As a percentage of total revenue, SG&A expense for the full year 2019 accounted for 11.4% compared to 10.4% 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 2019 was $1.8 million, compared to net loss of $4.0 million in the prior year. Net loss per share for the full year 2019 was $0.23 for both basic and diluted, compared to $0.52 for both basic and diluted for the prior year. During the third quarter of 2019, the Company recorded a goodwill impairment charge of $4.4 million.

Adjusted EBITDA

Adjusted EBITDA for fiscal year 2019 was $16.8 million as compared to $9.0 million in fiscal year 2018, an increase of 86%. The increase in Adjusted EBITDA was primarily attributable to stronger gross margins during 2019, and the negative impact of substantial project write-downs during 2018 in the Mid-Atlantic region. The Adjusted EBITDA per share for the full year 2019 was $2.19 for both basic and diluted, compared to $1.19 for both basic and diluted for the prior year.

Backlog and Remaining Performance Obligations

Aggregate backlog at December 31, 2019 was $561.2 million compared to $559.7 million at December 31, 2018. Backlog at December 31, 2019 consisted of $504.2 million of Construction segment work and $57.0 million of Service segment work.

Backlog includes unexercised contract options which are not included in the Company’s remaining performance obligations. Remaining performance obligations of the Company's Construction and Service segment contracts were $504.2 million and $41.9 million at December 31, 2019, respectively.

Balance Sheet

At December 31, 2019, the Company had current assets of $195.4 million and current liabilities of $156.9 million, representing a current ratio of 1.25x. Working capital was $38.5 million at December 31, 2019, an increase of $15.7 million from December 31, 2018. Long-term debt was $38.9 million at December 31, 2019, up from $23.7 million at December 31, 2018. The Company had no borrowings against its $14.0 million revolving credit facility at December 31, 2019.

Supplemental Information

Although Limbach is not currently reporting its financial results for any periods subsequent to December 31, 2019, management is providing the following unaudited supplemental balance sheet information as of April 30, 2020:

Cash

$13.0 million

Undrawn Revolver Availability

$10.5 million

Total Liquidity

$23.5 million

Conference Call Details

Date:

Wednesday, May 13, 2020

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: 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 12th 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 1,500 employees in 22 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, 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. 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

 

For the years ended December 31,

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

2019

2018

Revenue

$

 

553,334

 

$

 

546,526

 

Cost of revenue

481,457

 

487,095

 

Gross profit

71,877

 

59,431

 

Operating expenses:

 

Selling, general and administrative

63,168

 

57,089

 

Amortization of intangibles

642

 

1,272

 

Total operating expenses

63,810

 

58,361

 

Operating income

8,067

 

1,070

 

Other income (expenses):

 

Interest expense, net

(6,285

)

(3,305

)

Loss on debt modification

--

 

(335

)

Loss on debt extinguishment

 

(513

)

 

 

--

 

Gain on sale of property and equipment

57

 

90

 

Gain on change in fair value of warrant liability

 

588

 

 

 

--

 

Gain on embedded derivative

 

388

 

 

 

--

 

Impairment of goodwill

 

(4,359

)

 

 

--

 

Total other expenses

(10,124

)

(3,550

)

Loss before income taxes

(2,057

)

(2,480

)

Income tax benefit

(282

)

(635

)

Net loss

(1,775

)

(1,845

)

Dividends on cumulative redeemable convertible preferred stock

--

 

113

 

Premium paid on partial preferred redemption

--

 

(2,219

)

Net loss attributable to Limbach Holdings, Inc. common stockholders

$

 

(1,775

)

$

 

(3,951

)

 

Earnings Per Share ("EPS")

 

Net loss per share attributable to common stockholders:

 

Basic

$

 

(0.23

)

$

 

(0.52

)

Diluted

$

 

(0.23

)

$

 

(0.52

)

Weighted average number of shares outstanding:

 

Basic

7,662,362

 

7,562,586

 

Diluted

7,662,362

 

7,562,586

 

 
 

LIMBACH HOLDINGS, INC.

Consolidated Balance Sheets

 

(in thousands, except share data)

December 31, 2019

December 31, 2018

 

ASSETS

 

Current assets:

 

Cash and cash equivalents

$

8,344

$

1,619

Restricted cash

113

113

Accounts receivable, net

105,067

135,687

Contract assets

77,188

--

Costs and estimated earnings in excess of billings on uncompleted contracts

 

--

 

 

32,698

Advances to and equity in joint ventures, net

8

12

Other current assets

4,660

34,857

Total current assets

195,380

204,986

Property and equipment, net

21,287

20,527

Intangible assets, net

12,311

12,953

Goodwill

6,129

10,488

Operating lease right-of-use assets

 

21,056

 

 

--

Deferred tax asset

4,786

4,409

Other assets

668

271

Total assets

$

261,617

$

253,634

 

LIABILITIES

 

Current liabilities:

 

Current portion of long-term debt

$

4,425

$

3,141

Current operating lease liabilities

 

3,750

 

 

--

Accounts payable, including retainage

86,267

74,353

Contract liabilities

 

42,370

 

 

--

Billing in excess of costs and estimated earnings on uncompleted contracts

--

50,843

Accrued income taxes

12

--

Accrued expenses and other current liabilities

20,045

53,801

Total current liabilities

156,869

182,138

Long-term debt

38,868

23,614

Long-term operating lease liabilities

 

18,247

 

 

--

Other long-term liabilities

763

1,514

Total liabilities

214,747

207,266

Commitments and contingencies

Redeemable convertible preferred stock, net, par value of $0.0001, 1,000,000 shares authorized, no shares issued and outstanding at December 31, 2019 and December 31, 2018 ($0 redemption value as of December 31, 2019 and December 31, 2018)

--

-- 

 

STOCKHOLDERS' EQUITY

Common stock, par value $0.0001, 100,000,000 shares authorized; 7,688,958 issued and outstanding at December 31, 2019 and 7,592,911 at December 31, 2018

1

1

Additional paid-in capital

56,557

54,791

Accumulated deficit

(9,688

)

(8,424

)

Total stockholders' equity

46,870

46,368

Total liabilities and stockholders' equity

261,617

253,634

 

LIMBACH HOLDINGS, INC.

Consolidated Statements of Cash Flows

 

For the years ended December 31,

(in thousands)

2019

 

2018

Cash flows from operating activities:

 

Net loss

$

 

(1,775

)

$

(1,845

)

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

 

 

Depreciation and amortization

6,286

 

 

5,683

 

Noncash operating lease expense

 

3,799

 

 

 

--

 

Impairment of goodwill

 

4,359

 

 

 

--

 

Provision for doubtful accounts

95

 

 

64

 

Stock-based compensation expense

1,766

 

 

2,159

 

Loss on debt modification

--

 

 

335

 

Loss on debt extinguishment

 

513

 

 

 

--

 

Amortization of debt discount and issuance costs

1,392

 

 

373

 

Deferred tax benefit

(609

)

 

(745

)

Change in fair value of warrant liability

 

(588

)

 

 

--

 

Gain on embedded derivative

 

(388

)

 

 

--

 

Gain on sale of property and equipment

 

(57

)

 

 

(90

)

Changes in operating assets and liabilities:

 

 

Accounts receivable

659

 

 

(6,408

)

Contract assets

 

(13,378

)

 

 

--

 

Costs and estimated earnings in excess of billings

--

 

 

308

 

on uncompleted contracts

 

 

Other current assets

30,139

 

 

(31,162

)

Other assets

--

 

 

--

 

Accounts payable

11,914

 

 

6,914

 

Contract liabilities

 

(6,446

)

 

 

--

 

Billings in excess of costs and estimated earnings

 

 

on uncompleted contracts

--

 

 

22,301

 

Prepaid income taxes

 

58

 

 

 

(2,753

)

Accrued taxes payable

12

 

 

--

 

Accrued expenses and other current liabilities

(34,686

)

 

29,535

 

Operating lease liabilities

 

(3,654

)

 

 

--

 

Other long-term liabilities

(337

)

 

653

 

Net cash provided by (used in) operating activities

(926

)

 

 

25,322

 

Cash flows from investing activities:

 

Proceeds from sale of property and equipment

168

 

198

 

Advances to joint ventures

4

 

(1

)

Purchase of property and equipment

(2,663

)

(3,877

)

Net cash used in investing activities

(2,491

)

(3,680

)

LIMBACH HOLDINGS, INC.

Consolidated Statements of Cash Flows

(continued)

 

For the years ended December 31,

(in thousands)

 

 

 

 

Cash flows from financing activities:

2019

2018

Bank overdrafts

(1,333

)

(6,446

)

Payments on Credit Agreement term loan

(14,335

)

(3,300

)

Proceeds from Credit Agreement revolver

17,500

 

109,650

 

Payments on Credit Agreement revolver

(17,500

)

(115,308

)

Proceeds from 2019 Revolving Credit Facility

 

32,500

 

 

 

--

 

Payments on 2019 Revolving Credit Facility

 

(32,500

)

 

 

--

 

Proceeds from 2019 Refinancing Term Loan, net of debt discount

 

38,644

 

 

 

--

 

Warrants issued in conjunction with the 2019 Refinancing Term Loan

 

969

 

 

 

--

 

Embedded derivative associated with the 2019 Refinancing Term Loan

 

388

 

 

 

--

 

Proceeds from Bridge Term Loan

--

 

10,000

 

Payments on Bridge Term Loan

(7,736

)

(2,264

)

Payments on finance leases

(2,547

)

(1,939

)

Convertible preferred stock redeemed

--

 

(9,191

)

Convertible preferred stock dividends paid

--

 

(875

)

Taxes paid related to net-share settlement of equity awards

(131

)

(211

)

Payments of debt issuance costs

(3,777

)

(765

)

Net cash provided by (used in) financing activities

10,142

 

(20,649

)

Increase in cash and cash equivalents

6,725

 

993

 

Cash, cash equivalents and restricted cash, beginning of year

1,732

 

739

 

Cash, cash equivalents and restricted cash, end of year

$

 

8,457

 

$

1,732

 

Supplemental disclosures of cash flow information

 

Noncash investing and financing transactions:

 

Debt issuance costs related to 2019 Refinancing Agreement paid-in-kind

$

 

1,000

 

 

$

--

 

Property and equipment acquired financed with capital leases

--

 

3,260

 

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

 

3,355

 

 

 

--

 

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

 

3,578

 

 

 

--

 

Right of use assets disposed or adjusted modifying operating leases liabilities

 

1,651

 

 

 

--

 

Right of use assets disposed or adjusted modifying finance leases liabilities

 

(78

)

 

 

--

 

Interest paid

$

 

4,607

 

$

2,714

 

LIMBACH HOLDINGS, INC.

Consolidated Statements of Operations

For the years ended December 31,

Increase/(Decrease)

(in thousands, except for percentages)

2019

2018

$

%

Revenue

 

Construction

$

 

438,196

 

 

$

438,229

 

 

(33

)

--

%

Service

115,138

 

108,297

 

 

6,841

 

6.3

%

Total revenue

553,334

 

546,526

 

 

6,808

 

1.2

%

 

 

 

 

Gross profit:

 

 

 

 

Construction

43,493

 

36,721

 

 

6,772

 

18.4

%

Service

28,384

 

22,710

 

 

5,674

 

25.0

%

Total gross profit

71,877

 

59,431

 

 

12,446

 

20.9

%

 

 

 

 

Selling, general and administrative expenses:

 

 

 

 

Construction

28,356

 

27,307

 

 

1,049

 

3.8

%

Service

17,367

 

15,003

 

 

2,364

 

15.8

%

Corporate

17,445

 

14,779

 

 

2,666

 

18.0

%

Total selling, general and administrative expenses

63,168

 

 

57,089

 

 

 

6,079

 

10.6

%

 

 

 

 

Amortization of intangibles

642

 

1,272

 

 

(630

)

(49.5

%)

 

 

 

 

Operating income:

 

 

 

 

Construction

15,137

 

9,414

 

 

5,723

 

60.8

%

Service

11,017

 

7,707

 

 

3,310

 

42.9

%

Corporate

(18,087

)

(16,051

)

 

2,036

 

(12.7

%)

Operating income:

$

 

8,067

 

$

1,070

 

 

6,997

 

653.9

%

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 net 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 loss to Adjusted EBITDA

 

For the years ended
December 31,

(in thousands)

2019

2018

Net loss

$

 

(1,775

)

$

 

(1,845

)

 

Adjustments:

 

Depreciation and amortization

6,286

 

5,683

 

Impairment of goodwill

 

4,359

 

 

 

--

 

Change in fair value of warrants

 

(588

)

 

 

--

 

Gain on embedded derivative

 

(388

)

 

 

--

 

CFO transition costs

 

576

 

 

 

--

 

Interest expense

6,285

 

3,305

 

Loss on debt modification

 

--

 

 

 

335

 

Loss on debt extinguishment

 

513

 

 

 

--

 

Non-cash stock-based compensation expense

1,766

 

2,159

 

Income tax benefit

(282

)

(635

)

Adjusted EBITDA

$

 

16,752

 

$

 

9,002

 

 

 

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

Source: Limbach Holdings, Inc.