Revenue from Owner Direct Relationships
(“ODR”) Segment up 18.1% Year-over-Year
ODR Segment Accounted for Approximately
47.1% of Revenue and 60.5% of Consolidated Gross Profit
Consolidated Gross Margin Increased to
22.8%
Increase in FY 2023 Adjusted EBITDA
Guidance
Limbach Holdings, Inc. (Nasdaq: LMB) (“Limbach” or the
“Company”) today announced its financial results for the quarter
ended June 30, 2023.
2023 Second Quarter Financial Overview Compared to 2022
Second Quarter
- Consolidated revenue was $124.9 million, an increase of 7.5%
from $116.1 million.
- Gross profit was $28.5 million, an increase of 33.7% from $21.3
million.
- Net income of $5.3 million, or $0.46 per diluted share,
compared to a net income of $0.9 million, or $0.08 per diluted
share.
- Adjusted EBITDA of $11.9 million, up 81.1% from $6.6
million.
- Net cash provided by operating activities of $16.9 million,
compared to $15.6 million.
Management Comments
Michael McCann, Limbach’s President and Chief Executive Officer,
said, “We continued to execute on a number of fronts during the
second quarter, with solid revenue growth in our ODR segment and
improvement in gross margin in both segments. The net result was a
sharp improvement in net income and Adjusted EBITDA from year-ago
levels. We continue to experience strong demand for our services in
the ODR segment across a number of our target end markets as tight
supply chain conditions persist. With tight supply chain conditions
for new equipment, we see increased demand for T&M work to keep
aging equipment working and an increased interest in operating
efficiencies on the part of building owners which is largely
attributable to the increase in Adjusted EBITDA guidance.”
Mr. McCann continued, “We remain intensely focused on
positioning Limbach as the preferred building solutions partner for
enterprises with mission critical assets, driving demand for our
services throughout the cycle. By providing value-added solutions
that enable our customers to improve their operating efficiency and
return on assets, we are able to create durable relationships that
allow us to realize continued improvement in margins and
profitability.”
Mr. McCann concluded, “Our value creation strategy centers on
three primary levers – increasing the proportion of our revenues
that come from our higher-margin ODR segment; delivering
higher-margin evolved offerings for our customers; and pursuit of
strategic acquisitions. Following the end of the second quarter, we
announced the acquisition of ACME Industrial Products based in
Chattanooga, Tennessee. We are very excited to welcome everyone at
ACME to the Limbach family. ACME enjoys an outstanding reputation
in the Chattanooga area and is a market leader in servicing
hydroelectric facilities. This acquisition is very much ‘on
strategy’ and we continue to work diligently on additional
acquisition opportunities for this year and beyond.”
Second Quarter 2023 Results Detail
The following are results for the three months ended June 30,
2023 compared to the three months ended June 30, 2022:
- Consolidated revenue was $124.9 million, an increase of 7.5%
from $116.1 million. ODR segment revenue of $58.8 million increased
by $9.0 million, or 18.1%, while GCR segment revenue was relatively
flat. The Company continued its strategic focus on expanding the
ODR segment’s contribution to the business.
- Gross margin increased to 22.8%, up from 18.4%. On a dollar
basis, total gross profit was $28.5 million, compared to $21.3
million. ODR gross profit increased $4.6 million, or 36.6%, due to
the combination of an increase in revenue and higher segment
margins of 29.3% versus 25.4% driven by contract mix. GCR gross
profit increased $2.6 million, or 29.7%, due to higher segment
margins of 17.1%, compared with 13.1%. The Company continues to
expect annual GCR gross margins to trend to a range of 12% to 15%,
while ODR margins are expected to be in a range from 25% to
28%.
- Selling, general and administrative expenses increased by
approximately $1.7 million, to $20.4 million, compared to $18.7
million. The increase in SG&A was primarily due to a $1.3
million increase associated with payroll-related expenses and a
$0.5 million increase in stock compensation expense, partially
offset by a $0.4 million decrease in rent related expenses. As a
percent of revenue, selling, general and administrative expenses
were 16.3%, up from 16.1%.
- Interest expense was $0.5 million during the current and prior
year quarter, which was the result of higher interest rates on
outstanding debt despite a lower overall outstanding debt balance
period-over-period.
- Interest income was $0.2 million compared to marginal interest
income in the prior year. This increase was due to the Company's
overnight repurchase agreement, investments in U.S. Treasury Bills,
and money market funds.
- Net income was $5.3 million as compared to $0.9 million.
Diluted income per share was $0.46 as compared to $0.08. Adjusted
EBITDA was $11.9 million as compared to $6.6 million, an increase
of 81.1%.
- Net cash provided by operating activities increased to $16.9
million as compared to $15.6 million.
Balance Sheet
At June 30, 2023, we had cash and cash equivalents of $45.9
million. We had current assets of $199.2 million and current
liabilities of $127.3 million at June 30, 2023, representing a
current ratio of 1.57x compared to 1.42x at December 31, 2022.
Working capital was $71.9 million at June 30, 2023, an increase of
$5.0 million from December 31, 2022. At June 30, 2023, we had $10.0
million in borrowings against our revolving credit facility and
$4.2 million for standby letters of credit. During the six months
ended June 30, 2023, the Company made cash payments of $11.5
million on the principal portion of the A&R Wintrust Term Loan
prior to its extinguishment.
Through June 30, 2023, all 600,000 of our $15 Exercise Price
Sponsor Warrants and 163,444 of our Merger Warrants were exercised
on a cashless basis by the holders of the warrants, which resulted
in the warrants being exercised for 167,564 and 45,797 shares of
our common stock, respectively. For the period from July 1, 2023
through July 20, 2023, the holders to the Merger Warrants exercised
on a cashless basis 443,032 warrants, which resulted in the Merger
Warrants being converted into 228,945 shares of our common stock.
The remaining 23,167 unexercised Merger Warrants expired by their
terms on July 20, 2023.
Subsequent Events
On July 3, 2023, the Company completed the acquisition of ACME
Industrial Piping, LLC (“ACME”), a specialty industrial contractor
based in Chattanooga, Tennessee, for a purchase price at closing of
$5 million in cash. The transaction also provides for an earnout of
up to $2.5 million potentially being paid out over the next two
years. ACME specializes in performing industrial maintenance,
capital project work, and emergency services for specialty chemical
and manufacturing clients, and is a leading mechanical solutions
provider for hydroelectric producers.
2023 Guidance
We are updating our guidance for FY 2023 as follows:
Current
Previous
Revenue
$490 million - $520 million
$490 million - $520 million
Adjusted EBITDA
$38 million - $41 million
$33 million - $37 million
Conference Call Details
Date:
Thursday, August 10, 2023
Time:
9:00 a.m. Eastern Time
Participant Dial-In Numbers:
Domestic callers:
(877) 407-6176
International callers:
(201) 689-8451
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=c1l6wBEc.
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
June 30,
Six Months Ended
June 30,
(in thousands, except share and per
share data)
2023
2022
2023
2022
Revenue
$
124,882
$
116,120
$
245,891
$
230,942
Cost of revenue
96,369
94,800
191,151
191,282
Gross profit
28,513
21,320
54,740
39,660
Operating expenses:
Selling, general and administrative
20,416
18,690
41,466
37,424
Change in fair value of contingent
consideration
162
765
303
765
Amortization of intangibles
383
399
766
798
Total operating expenses
20,961
19,854
42,535
38,987
Operating income
7,552
1,466
12,205
673
Other (expenses) income:
Interest expense
(511
)
(478
)
(1,178
)
(964
)
Interest income
247
—
247
—
Gain (loss) on disposition of property and
equipment
175
147
(40
)
111
Loss on early termination of operating
lease
—
(32
)
—
(849
)
Loss on early debt extinguishment
(311
)
—
(311
)
—
Gain on change in fair value of interest
rate swap
193
—
37
—
Total other expenses
(207
)
(363
)
(1,245
)
(1,702
)
Income (loss) before income taxes
7,345
1,103
10,960
(1,029
)
Income tax provision (benefit)
2,025
237
2,647
(379
)
Net income (loss)
$
5,320
$
866
$
8,313
$
(650
)
Earnings (loss) Per
Share (“EPS”)
Earnings (loss) per common share:
Basic
$
0.50
$
0.08
$
0.79
$
(0.06
)
Diluted
$
0.46
$
0.08
$
0.73
$
(0.06
)
Weighted average number of shares
outstanding:
Basic
10,644,423
10,423,068
10,560,381
10,421,886
Diluted
11,507,311
10,567,304
11,336,474
10,421,886
LIMBACH HOLDINGS, INC.
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands, except share and per
share data)
June 30, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
45,929
$
36,001
Restricted cash
65
113
Accounts receivable (net of allowance for
credit losses of $295 and net of allowance for doubtful accounts of
$234 as of June 30, 2023 and December 31, 2022, respectively)
87,230
124,442
Contract assets
59,424
61,453
Income tax receivable
814
95
Other current assets
5,747
3,886
Total current assets
199,209
225,990
Property and equipment, net
19,623
18,224
Intangible assets, net
14,575
15,340
Goodwill
11,370
11,370
Operating lease right-of-use assets
17,149
18,288
Deferred tax asset
4,999
4,829
Other assets
502
515
Total assets
$
267,427
$
294,556
LIABILITIES
Current liabilities:
Current portion of long-term debt
$
2,431
$
9,564
Current operating lease liabilities
3,598
3,562
Accounts payable, including retainage
53,376
75,122
Contract liabilities
43,682
44,007
Accrued income taxes
1,505
1,888
Accrued expenses and other current
liabilities
22,677
24,942
Total current liabilities
127,269
159,085
Long-term debt
19,485
21,528
Long-term operating lease liabilities
14,513
15,643
Other long-term liabilities
502
2,858
Total liabilities
161,769
199,114
STOCKHOLDERS’ EQUITY
Common stock, $0.0001 par value;
100,000,000 shares authorized, issued 10,946,316 and 10,471,410,
respectively, and 10,766,664 and 10,291,758 outstanding,
respectively
1
1
Additional paid-in capital
89,712
87,809
Treasury stock, at cost (179,652 shares at
both period ends)
(2,000
)
(2,000
)
Retained earnings
17,945
9,632
Total stockholders’ equity
105,658
95,442
Total liabilities and stockholders’
equity
$
267,427
$
294,556
LIMBACH HOLDINGS, INC.
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Six Months Ended
June 30,
(in thousands)
2023
2022
Cash flows from operating
activities:
Net income (loss)
$
8,313
$
(650
)
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation and amortization
3,859
4,148
Provision for credit losses / doubtful
accounts
116
104
Stock-based compensation expense
2,234
1,174
Noncash operating lease expense
1,882
2,232
Amortization of debt issuance costs
58
65
Deferred income tax provision
(170
)
(12
)
Loss (gain) on sale of property and
equipment
40
(111
)
Loss on early termination of operating
lease
—
849
Loss on change in fair value of contingent
consideration
303
765
Loss on early debt extinguishment
311
—
Gain on change in fair value of interest
rate swap
(37
)
—
Changes in operating assets and
liabilities:
Accounts receivable
37,096
(11,796
)
Contract assets
2,029
8,904
Other current assets
(1,861
)
(520
)
Accounts payable, including retainage
(21,747
)
(635
)
Prepaid income taxes
(719
)
(562
)
Accrued taxes payable
(383
)
(501
)
Contract liabilities
(325
)
13,123
Operating lease liabilities
(1,836
)
(2,165
)
Accrued expenses and other current
liabilities
(1,806
)
(1,861
)
Payment of contingent consideration
liability in excess of acquisition-date fair value
(1,224
)
—
Other long-term liabilities
159
69
Net cash provided by operating
activities
26,292
12,620
Cash flows from investing
activities:
Proceeds from sale of property and
equipment
275
189
Purchase of property and equipment
(1,499
)
(473
)
Net cash used in investing activities
(1,224
)
(284
)
Cash flows from financing
activities:
Payments on Wintrust and A&R Wintrust
Term Loans
(21,452
)
(9,149
)
Proceeds from Wintrust Revolving Loan
10,000
15,194
Payments on Wintrust Revolving Loan
—
(11,694
)
Payment of contingent consideration
liability up to acquisition-date fair value
(1,776
)
—
Payments on finance leases
(1,302
)
(1,358
)
Payments of debt issuance costs
(50
)
(25
)
Taxes paid related to net-share settlement
of equity awards
(847
)
(363
)
Proceeds from contributions to Employee
Stock Purchase Plan
239
213
Net cash used in financing activities
(15,188
)
(7,182
)
Increase in cash, cash equivalents and
restricted cash
9,880
5,154
Cash, cash equivalents and restricted
cash, beginning of period
36,114
14,589
Cash, cash equivalents and restricted
cash, end of period
$
45,994
$
19,743
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
3,392
1,968
Right of use assets disposed or adjusted
modifying operating lease liabilities
—
(1,276
)
Right of use assets disposed or adjusted
modifying finance lease liabilities
(30
)
(77
)
Interest paid
1,181
911
Cash paid for income taxes
$
3,919
$
696
LIMBACH HOLDINGS, INC.
Condensed Consolidated Segment
Operating Results (Unaudited)
Three Months Ended
June 30,
Increase/(Decrease)
(in thousands, except for
percentages)
2023
2022
$
%
Statement of Operations Data:
Revenue:
GCR
$
66,102
52.9
%
$
66,336
57.1
%
$
(234
)
(0.4
)%
ODR
58,780
47.1
%
49,784
42.9
%
8,996
18.1
%
Total revenue
124,882
100.0
%
116,120
100.0
%
8,762
7.5
%
Gross profit:
GCR(1)
11,272
17.1
%
8,694
13.1
%
2,578
29.7
%
ODR(2)
17,241
29.3
%
12,626
25.4
%
4,615
36.6
%
Total gross profit
28,513
22.8
%
21,320
18.4
%
7,193
33.7
%
Selling, general and administrative(3)
20,416
16.3
%
18,690
16.1
%
1,726
9.2
%
Change in fair value of contingent
consideration
162
0.1
%
765
0.7
%
(603
)
(78.8
)%
Amortization of intangibles
383
0.3
%
399
0.3
%
(16
)
(4.0
)%
Total operating income
$
7,552
6.0
%
$
1,466
1.3
%
$
6,086
415.1
%
(1)
As a percentabe of GCR revenue.
(2)
As a percentage of ODR revenue.
(3)
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 June 30, 2023
and 2022, respectively.
LIMBACH HOLDINGS, INC.
Condensed Consolidated Segment
Operating Results (Unaudited)
Six Months Ended
June 30,
Increase/(Decrease)
(in thousands, except for
percentages)
2023
2022
$
%
Statement of Operations Data:
Revenue:
GCR
$
128,393
52.2
%
$
138,268
59.9
%
$
(9,875
)
(7.1
)%
ODR
117,498
47.8
%
92,674
40.1
%
24,824
26.8
%
Total revenue
245,891
100.0
%
230,942
100.0
%
14,949
6.5
%
Gross profit:
GCR(1)
21,590
16.8
%
17,052
12.3
%
4,538
26.6
%
ODR(2)
33,150
28.2
%
22,608
24.4
%
10,542
46.6
%
Total gross profit
54,740
22.3
%
39,660
17.2
%
15,080
38.0
%
Selling, general and administrative(3)
41,466
16.9
%
37,424
16.2
%
4,042
10.8
%
Change in fair value of contingent
consideration
303
0.1
%
765
0.3
%
(462
)
(60.4
)%
Amortization of intangibles
766
0.3
%
798
0.3
%
(32
)
(4.0
)%
Total operating income
$
12,205
5.0
%
$
673
0.3
%
$
11,532
1,713.5
%
(1)
As a percentage of GCR revenue.
(2)
As a percentage of ODR revenue.
(3)
Included within selling, general and
administrative expenses was $2.2 million and $1.2 million of stock
based compensation expense for the six months ended June 30, 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 June
30,
Six Months Ended June
30,
(in thousands)
2023
2022
2023
2022
Net income (loss)
$
5,320
$
866
$
8,313
$
(650
)
Adjustments:
Depreciation and amortization
1,937
2,086
3,859
4,148
Interest expense
511
478
1,178
964
Interest income
(247
)
—
(247
)
—
Non-cash stock-based compensation
expense
1,101
575
2,234
1,174
Loss on early debt extinguishment
311
—
311
—
Change in fair value of interest rate
swap
(193
)
—
(37
)
—
CEO transition costs
147
—
958
—
Loss on early termination of operating
lease
—
32
—
849
Income tax provision (benefit)
2,025
237
2,647
(379
)
Acquisition and other transaction
costs
299
45
299
198
Change in fair value of contingent
consideration
162
765
303
765
Restructuring costs(1)
532
1,491
772
2,926
Adjusted EBITDA
$
11,905
$
6,575
$
20,590
$
9,995
(1)
For the three and six months ended June 30, 2023, the majority
of the restructuring costs related to our Southern California and
Eastern Pennsylvania branches. For the three and six months ended
June 30, 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/20230809827857/en/
Investor Relations
The Equity Group, Inc. Jeremy Hellman, CFA Vice President (212)
836-9626 / jhellman@equityny.com
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