Revenue from Owner Direct Relationships
(“ODR”) Segment up 36.9% Year-over-Year
ODR Segment Accounted for Approximately
48.5% of Revenue and 60.7% of Consolidated Gross Profit
Consolidated Gross Margin Increased to
21.7%
Limbach Holdings, Inc. (Nasdaq: LMB) (“Limbach” or the
“Company”) today announced its financial results for the quarter
ended March 31, 2023.
2023 First Quarter Financial Overview Compared to 2022 First
Quarter
- Consolidated revenue was $121.0 million, an increase of 5.4%
from $114.8 million.
- Gross profit was $26.2 million, an increase of 43.0% from $18.3
million.
- Net income of $3.0 million, or $0.27 per diluted share,
compared to a net loss of $1.5 million, or $(0.15) per diluted
share.
- Adjusted EBITDA of $8.7 million, up 154.0% from $3.4
million.
- Net cash provided by operating activities of $9.4 million,
compared to net cash used in operating activities of $3.0
million.
Management Comments
Michael McCann, Limbach’s President and Chief Executive Officer,
said, “We are off to a great start to the year as first quarter
results reflected solid performance and execution in both of our
operating segments. Our segment mix continued to benefit from the
ODR contribution which, coupled with improved gross margin
performance in each segment, resulted in a further increase in our
consolidated gross margin. As our segment revenue contributions
approach a 50/50 split, the higher growth in ODR, relative to the
planned decline in General Contractor Relationships (“GCR”), also
contributed to the year-over-year increase in total revenue.”
Mr. McCann continued, “Market conditions remain favorable as
businesses in several of our primary end markets continue to invest
in their building assets, such as data centers, hospitals, and
manufacturing facilities. At the same time, our ability to flex
between our customers’ capital and operating spending has us well
positioned for any changes they make to their infrastructure
investment plans. As we have noted previously, the tightness in
industrial supply chains has also contributed to our ODR growth by
driving demand for service and repair work necessary for customers
to keep their systems operational until such time as new equipment
replacement is available. When that time comes, we intend to
leverage our role as an indispensable partner delivering
value-added solutions to capture that replacement work.”
Mr. McCann concluded, “We are continuing to aggressively execute
our plan and our first quarter results demonstrate how we believe
that plan translates into expanding bottom-line results. While we
are proud of this success, I want to emphasize that we are still in
the early stages of our evolution. By continuing to evolve our
customer relationships, centered on value-added solutions and
proven success, while also maintaining an intense focus on
maximizing the return on our own assets, we believe there is plenty
of runway for further margin expansion, net income growth, and
continued cash generation.”
First Quarter 2023 Results
The following are results for the three months ended March 31,
2023 compared to the three months ended March 31, 2022:
- Consolidated revenue was $121.0 million, an increase of 5.4%
from $114.8 million. ODR segment revenue of $58.7 million increased
by $15.8 million, or 36.9%, while GCR segment revenue of $62.3
million was down $9.6 million, or 13.4%. The Company continued its
strategic focus on expanding the ODR segment’s contribution to the
business and improving GCR project execution and profitability by
pursuing GCR opportunities that were smaller in scope and lower in
contract value, shorter in duration, and where the Company can
leverage its captive design and engineering services.
- Gross margin increased to 21.7%, up from 16.0%. On a dollar
basis, total gross profit was $26.2 million, compared to $18.3
million. ODR gross profit increased $5.9 million, or 59.4%, due to
an increase in revenue at a higher margin of 27.1% versus 23.3%
driven by project mix. GCR gross profit increased $2.0 million, or
23.5%, largely reflecting lower revenue at a higher margin. GCR
gross margin improved to 16.6% from 11.6%.
- Selling, general and administrative expenses increased by
approximately $2.3 million, to $21.1 million, compared to $18.7
million. The increase in SG&A was primarily due to a $1.9
million increase associated with payroll related expenses, $0.8
million related to CEO transition costs, and a $0.5 million
increase in stock compensation expense, partially offset by a $0.5
million decrease in rent related expenses and a $0.3 decrease in
professional fees. As a percent of revenue, selling, general and
administrative expenses were 17.4%, up from 16.3%.
- Interest expense, net, was $0.7 million compared to $0.5
million. This increase was due to higher interest rates on
outstanding debt despite a lower overall outstanding debt balance
period-over-period.
- Net income was $3.0 million as compared to a net loss of $1.5
million. Diluted income per share was $0.27 as compared to diluted
loss per share of $(0.15). Adjusted EBITDA was $8.7 million as
compared to $3.4 million, an increase of 154.0%.
- Net cash provided by operating activities was $9.4 million as
compared to net cash used in operating activities of $3.0 million.
The increase in operating cash flows was primarily attributable to
a $4.5 million positive variance in net income as noted above.
Balance Sheet
At March 31, 2023, we had cash and cash equivalents of $41.4
million. We had current assets of $212.3 million and current
liabilities of $142.5 million at March 31, 2023, representing a
current ratio of 1.49x compared to 1.42x at December 31, 2022.
Working capital was $69.8 million at March 31, 2023, an increase of
$2.9 million from December 31, 2022. At March 31, 2023, we had no
borrowings against our revolving credit facility, $4.2 million for
standby letters of credit, and carried a term loan balance of $19.6
million. During the quarter, we made $1.9 million of scheduled
principal payments on our term loan, which reduced our outstanding
balance.
Subsequent Events
On May 5, 2023, the Company entered into the Second Amended and
Restated Credit Agreement (the “Second A&R Credit Agreement”)
with the lenders party thereto and Wintrust, which increased the
Company's revolving commitments from $25.0 million to $50.0 million
(the “Second A&R Wintrust Revolving Loan”), required the
Company to repay the then outstanding principal balance of the
Wintrust Term Loan using proceeds of the Second A&R Wintrust
Revolving Loan and extended the maturity date of the revolving
credit facility to February 24, 2028. Prior to the execution of
this agreement, the Company repaid $9.6 million of the then
outstanding balance under the Wintrust Term Loan with cash on hand.
As of May 8, 2023, the Company had $10.0 million outstanding under
the Second A&R Wintrust Revolving Loan. A copy of the Second
A&R Credit Agreement was filed as Exhibit 10.6 within the
Company's most recent Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on May 8, 2023.
2023 Guidance
We affirm our guidance for FY 2023 as follows:
Revenue
$490 million - $520 million
Adjusted EBITDA
$33 million - $37 million
Conference Call Details
Date:
Tuesday, May 9, 2023
Time:
9:00 a.m. Eastern Time
Participant Dial-In Numbers:
Domestic callers:
(888) 645-4404
International callers:
(862) 298-0702
Access by Webcast
The call will also be simultaneously webcast over the Internet
via the “Investor Relations” section of Limbach’s website at
www.limbachinc.com or by clicking on the conference call link:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=kd2gH5Bz.
An audio replay of the call will be archived on Limbach’s website
for 365 days.
About Limbach
Limbach is a building systems solutions firm with expertise in
the design, prefabrication, installation, management and
maintenance of heating, ventilation, air-conditioning ("HVAC"),
mechanical, electrical, plumbing and controls systems. With over
1,500 team members and 17 offices located throughout the United
States, we partner with institutions with mission-critical
infrastructures, such as data centers and healthcare, industrial
& light manufacturing, cultural & entertainment, higher
education, and life science facilities. With 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
indispensable 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 future periods, timing of the
recognition of backlog as revenue, the potential for recovery of
cost overruns, and the ability of Limbach 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
March 31,
(in thousands, except share and per
share data)
2023
2022
Revenue
$
121,009
$
114,822
Cost of revenue
94,782
96,482
Gross profit
26,227
18,340
Operating expenses:
Selling, general and administrative
21,050
18,734
Change in fair value of contingent
consideration
141
—
Amortization of intangibles
383
399
Total operating expenses
21,574
19,133
Operating income (loss)
4,653
(793
)
Other (expenses) income:
Interest expense, net
(667
)
(486
)
Loss on disposition of property and
equipment
(215
)
(36
)
Loss on early termination of operating
lease
—
(817
)
Loss on change in fair value of interest
rate swap
(156
)
—
Total other expenses
(1,038
)
(1,339
)
Income (loss) before income taxes
3,615
(2,132
)
Income tax provision (benefit)
622
(616
)
Net income (loss)
$
2,993
$
(1,516
)
Earnings Per Share
(“EPS”)
Earnings (loss) per common share:
Basic
$
0.29
$
(0.15
)
Diluted
$
0.27
$
(0.15
)
Weighted average number of shares
outstanding:
Basic
10,475,364
10,420,690
Diluted
11,040,063
10,420,690
LIMBACH HOLDINGS, INC.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per
share data)
March 31, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
41,376
$
36,001
Restricted cash
113
113
Accounts receivable (net of allowance for
credit losses of $278 and net of allowance for doubtful accounts of
$234 as of March 31, 2023 and December 31, 2022, respectively)
99,809
124,442
Contract assets
64,190
61,453
Income tax receivable
139
95
Other current assets
6,629
3,886
Total current assets
212,256
225,990
Property and equipment, net
18,694
18,224
Intangible assets, net
14,957
15,340
Goodwill
11,370
11,370
Operating lease right-of-use assets
18,055
18,288
Deferred tax asset
4,892
4,829
Other assets
346
515
Total assets
$
280,570
$
294,556
LIABILITIES
Current liabilities:
Current portion of long-term debt
$
9,643
$
9,564
Current operating lease liabilities
3,639
3,562
Accounts payable, including retainage
60,194
75,122
Contract liabilities
44,875
44,007
Accrued income taxes
2,574
1,888
Accrued expenses and other current
liabilities
21,572
24,942
Total current liabilities
142,497
159,085
Long-term debt
20,379
21,528
Long-term operating lease liabilities
15,374
15,643
Other long-term liabilities
3,083
2,858
Total liabilities
181,333
199,114
STOCKHOLDERS’ EQUITY
Common stock, $0.0001 par value;
100,000,000 shares authorized, issued 10,732,955 and 10,471,410,
respectively, and 10,553,303 and 10,291,758 outstanding,
respectively
1
1
Additional paid-in capital
88,611
87,809
Treasury stock, at cost (179,652 shares at
both period ends)
(2,000
)
(2,000
)
Retained earnings
12,625
9,632
Total stockholders’ equity
99,237
95,442
Total liabilities and stockholders’
equity
$
280,570
$
294,556
LIMBACH HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
(in thousands)
2023
2022
Cash flows from operating
activities:
Net income (loss)
$
2,993
$
(1,516
)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization
1,922
2,062
Provision for credit losses / doubtful
accounts
52
56
Stock-based compensation expense
1,133
599
Noncash operating lease expense
976
1,157
Amortization of debt issuance costs
38
32
Deferred income tax provision
(63
)
(77
)
Loss on sale of property and equipment
215
36
Loss on early termination of operating
lease
—
817
Loss on change in fair value of contingent
consideration
141
—
Loss on change in fair value of interest
rate swap
156
—
Changes in operating assets and
liabilities:
Accounts receivable
24,581
(19,698
)
Contract assets
(2,737
)
8,320
Other current assets
(2,743
)
(2,130
)
Accounts payable, including retainage
(14,929
)
(105
)
Prepaid income taxes
(44
)
(47
)
Accrued taxes payable
686
(501
)
Contract liabilities
868
7,732
Operating lease liabilities
(934
)
(1,117
)
Accrued expenses and other current
liabilities
(3,170
)
1,419
Other long-term liabilities
225
(4
)
Net cash provided by (used in) operating
activities
9,366
(2,965
)
Cash flows from investing
activities:
Proceeds from sale of property and
equipment
101
39
Purchase of property and equipment
(923
)
(169
)
Net cash used in investing activities
(822
)
(130
)
Cash flows from financing
activities:
Payments on Wintrust and A&R Wintrust
Term Loans
(1,857
)
(1,857
)
Proceeds from A&R Wintrust Revolving
Loan
—
9,400
Payments on finance leases
(639
)
(660
)
Taxes paid related to net-share settlement
of equity awards
(847
)
(363
)
Proceeds from contributions to Employee
Stock Purchase Plan
174
165
Net cash (used in) provided by financing
activities
(3,169
)
6,685
Increase (decrease) in cash, cash
equivalents and restricted cash
5,375
3,590
Cash, cash equivalents and restricted
cash, beginning of period
36,114
14,589
Cash, cash equivalents and restricted
cash, end of period
$
41,489
$
18,179
Supplemental disclosures of cash flow
information
Noncash investing and financing
transactions:
Right of use assets obtained in exchange
for new operating lease liabilities
$
742
$
—
Right of use assets obtained in exchange
for new finance lease liabilities
1,402
864
Right of use assets disposed or adjusted
modifying operating lease liabilities
—
(1,276
)
Right of use assets disposed or adjusted
modifying finance lease liabilities
(1
)
(19
)
Interest paid
657
459
Cash paid for income taxes
$
44
$
9
LIMBACH HOLDINGS, INC.
Condensed Consolidated Segment Operating Results
(Unaudited)
Three Months Ended
March 31,
Increase/(Decrease)
(in thousands, except for
percentages)
2023
2022
$
%
Statement of Operations Data:
Revenue:
GCR
$
62,291
51.5
%
$
71,932
62.6
%
$
(9,641
)
(13.4
) %
ODR
58,718
48.5
%
42,890
37.4
%
15,828
36.9
%
Total revenue
121,009
100.0
%
114,822
100.0
%
6,187
5.4
%
Gross profit:
GCR(1)
10,318
16.6
%
8,358
11.6
%
1,960
23.5
%
ODR(2)
15,909
27.1
%
9,982
23.3
%
5,927
59.4
%
Total gross profit
26,227
21.7
%
18,340
16.0
%
7,887
43.0
%
Selling, general and administrative
21,050
17.4
%
18,734
16.3
%
2,316
12.4
%
Change in fair value of contingent
consideration
141
0.1
%
—
—
%
141
100.0
%
Amortization of intangibles
383
0.3
%
399
0.3
%
(16
)
(4.0
) %
Total operating income
$
4,653
3.8
%
$
(793
)
(0.7
) %
$
5,446
686.8
%
- As a percentage of GCR revenue.
- As a percentage of ODR revenue.
- Included within selling, general and administrative expenses
was $1.1 million and $0.6 million of stock based compensation
expense for the three months ended March 31, 2023 and 2022,
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 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 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 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
March 31,
(in thousands)
2023
2022
Net income (loss)
$
2,993
$
(1,516
)
Adjustments:
Depreciation and amortization
1,922
2,062
Interest expense, net
667
486
Non-cash stock-based compensation
expense
1,133
599
Change in fair value of interest rate
swap
156
—
CEO transition costs
811
—
Loss on early termination of operating
lease
—
817
Income tax provision (benefit)
622
(616
)
Acquisition and other transaction
costs
—
153
Change in fair value of contingent
consideration
141
—
Restructuring costs(1)
240
1,435
Adjusted EBITDA
$
8,685
$
3,420
- For the three months ended March 31, 2023, the majority of the
restructuring costs related to our Southern California and Eastern
Pennsylvania branches. For the three months ended March 31, 2022,
the majority of the restructuring costs related to our Southern
California and Eastern Pennsylvania branches and nominal
restructuring costs related to cost initiatives throughout the
company.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230508005624/en/
Investor Relations The
Equity Group, Inc. Jeremy Hellman, CFA Vice President (212)
836-9626 / jhellman@equityny.com
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