Revenue from Owner Direct Relationships
(“ODR”) Segment up 10.3% Year-over-Year for Q3
ODR Segment Accounted for Approximately
51.5% of Revenue and 61.7% of Consolidated Gross Profit for the
Quarter
Consolidated Gross Margin Increased to 24.5%
in the Quarter
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 September 30, 2023.
2023 Third Quarter Financial Overview Compared to 2022 Third
Quarter
- Consolidated revenue was $127.8 million, an increase of 4.4%
from $122.4 million.
- Gross profit was $31.2 million, an increase of 25.7% from $24.9
million.
- Net income of $7.2 million, or $0.61 per diluted share,
compared to net income of $3.6 million, or $0.34 per diluted
share.
- Adjusted EBITDA of $13.6 million, up 33.6% from $10.2
million.
- Net cash provided by operating activities of $17.2 million
compared to $10.4 million.
Management Comments
Michael McCann, Limbach’s President and Chief Executive Officer,
said, “Our third quarter results reflected continued success across
all three pillars of our growth strategy. ODR revenue continues to
expand, supported by strong demand in many of the verticals we
serve. At the same time, GCR revenue was unchanged from the prior
year period, resulting in overall top line growth for the quarter,
both sequentially and compared to Q3 2022. We were also able to
continue to boost margins, with consolidated gross margin up over
400 basis points versus the prior year period. Underpinning our
margin performance is our continued emphasis on providing
value-added services and solutions for our customers’ mission
critical building assets.”
Mr. McCann continued, “The third pillar of our growth strategy
is M&A and with the acquisition of Industrial Air that we
announced last week, we have been able to add two outstanding
businesses to the Limbach family this year. Early in the third
quarter, we acquired ACME Industrial based in Chattanooga,
Tennessee, which is a tuck-in deal that we’re excited about. ACME
is right down the road from our Jake Marshall operations and checks
all our acquisition criteria boxes. Subsequent to the end of the
quarter, the acquisition of Industrial Air, in Greensboro, North
Carolina falls into our other target category as it gives us a new
presence in an exciting, growing market.”
Mr. McCann concluded, “Overall current market conditions
continue to be highly favorable for our business. While we have
witnessed some improvements in the supply chains for ‘off the
shelf’ equipment, more complex systems remain in a tight state. We
have been very purposeful in how we go to market, particularly in
the way we can provide value for our customers as they flex their
spending from capital budgets to operating expense budgets.
Although cyclicality is unlikely to completely disappear, we expect
this comprehensive focus and positioning will allow us to mitigate
some of the normal top-line volatility experienced by legacy
construction companies, enabling Limbach to continue growing its
bottom line.”
Third Quarter 2023 Results Detail
The following are results for the three months ended September
30, 2023 compared to the three months ended September 30, 2022:
- Consolidated revenue was $127.8 million, an increase of 4.4%
from $122.4 million. ODR segment revenue of $65.8 million increased
by $6.1 million, or 10.3%, 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 24.5%, up from 20.3%. On a dollar
basis, total gross profit was $31.2 million, compared to $24.9
million. ODR gross profit increased $4.1 million, or 26.8%, due to
the combination of an increase in revenue and higher segment
margins of 29.3% versus 25.5% driven by contract mix. GCR gross
profit increased $2.3 million, or 24.1%, due to higher segment
margins of 19.3%, compared with 15.4%. GCR segment margins during
the current quarter also benefited from the inclusion of a $1.2
million write-up associated with the settlement of a previously
outstanding claim as well as an additional $1.2 million gross
margin benefit as a result of an early completion of a project due
to a reduction in scope from the customer.
- Selling, general and administrative (“SG&A”) expenses
increased by approximately $2.3 million, to $21.0 million, compared
to $18.7 million. The increase in SG&A expense was primarily
due to a $1.4 million increase associated with payroll related
expenses, a $0.6 million increase associated with professional
fees, which included costs associated with the ACME Transaction,
and a $0.3 million increase in stock compensation expense. As a
percent of revenue, SG&A expenses were 16.4%, up from
15.3%.
- Interest expense was $0.4 million during the current quarter
compared to $0.5 million, which was the result of a lower overall
outstanding debt balance period-over-period despite higher interest
rates on outstanding debt.
- Interest income was $0.4 million during the current quarter.
This increase was due to the Company's investments in overnight
repurchase agreements, U.S. Treasury Bills, and money market
funds.
- Net income was $7.2 million as compared to $3.6 million.
Diluted income per share was $0.61 as compared to $0.34. Adjusted
EBITDA was $13.6 million as compared to $10.2 million, an increase
of 33.6%.
- Net cash provided by operating activities increased to $17.2
million as compared to $10.4 million. During the third quarter,
Limbach received $15.6 million of cash, net, from the settlement of
a previously outstanding claim. Offsetting that inflow from
operations, $4.9 million of cash was used to fund the acquisition
of ACME Industrial.
Balance Sheet
At September 30, 2023, we had cash and cash equivalents of $57.5
million. We had current assets of $214.2 million and current
liabilities of $136.5 million at September 30, 2023, representing a
current ratio of 1.57x compared to 1.42x at December 31, 2022.
Working capital was $77.7 million at September 30, 2023, an
increase of $10.8 million from December 31, 2022. At September 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 nine months ended September 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.
Subsequent Events
On November 1, 2023, Limbach completed the acquisition of
Industrial Air, LLC (“Industrial Air”), a Greensboro, North
Carolina-based specialty mechanical contractor, for a purchase
price at closing of $13.5 million in cash. The transaction also
provides for an earnout of up to $6.5 million potentially being
paid out over the next two years. Industrial Air serves industrial
customers throughout the Southeast United States and along the
Eastern seaboard, focusing on delivering engineered air handling
systems, including air condition and air filtration, along with
controls systems and maintenance work. In addition, Industrial Air
manufactures a wide range of components for air conditioning and
filtration systems.
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
$42 million - $45 million
$38 million - $41 million
Conference Call Details
Date:
Thursday, November 9, 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=cyobAYjZ.
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 19 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
September 30,
Nine Months Ended
September 30,
(in thousands, except share and per
share data)
2023
2022
2023
2022
Revenue
$
127,768
$
122,357
$
373,659
$
353,299
Cost of revenue
96,524
97,503
287,675
288,785
Gross profit
31,244
24,854
85,984
64,514
Operating expenses:
Selling, general and administrative
20,967
18,688
62,433
56,113
Change in fair value of contingent
consideration
161
386
464
1,151
Amortization of intangibles
288
386
1,054
1,184
Total operating expenses
21,416
19,460
63,951
58,448
Operating income
9,828
5,394
22,033
6,066
Other income (expenses):
Interest expense
(437
)
(547
)
(1,615
)
(1,511
)
Interest income
377
—
624
—
Gain on disposition of property and
equipment
68
150
28
262
Loss on early termination of operating
lease
—
—
—
(849
)
Loss on early debt extinguishment
—
—
(311
)
—
Gain on change in fair value of interest
rate swap
116
298
153
298
Total other income (expenses)
124
(99
)
(1,121
)
(1,800
)
Income before income taxes
9,952
5,295
20,912
4,266
Income tax provision
2,760
1,654
5,407
1,275
Net income
$
7,192
$
3,641
$
15,505
$
2,991
Earnings Per Share
(“EPS”)
Earnings per common share:
Basic
$
0.66
$
0.35
$
1.45
$
0.29
Diluted
$
0.61
$
0.34
$
1.33
$
0.28
Weighted average number of shares
outstanding:
Basic
10,962,622
10,444,987
10,695,973
10,429,671
Diluted
11,789,137
10,690,434
11,671,819
10,595,061
LIMBACH HOLDINGS, INC.
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands, except share and per
share data)
September 30, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
57,473
$
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 September 30, 2023 and December 31, 2022,
respectively)
103,511
124,442
Contract assets
47,853
61,453
Income tax receivable
—
95
Other current assets
5,346
3,886
Total current assets
214,248
225,990
Property and equipment, net
19,377
18,224
Intangible assets, net
16,586
15,340
Goodwill
13,703
11,370
Operating lease right-of-use assets
15,845
18,288
Deferred tax asset
4,830
4,829
Other assets
613
515
Total assets
$
285,202
$
294,556
LIABILITIES
Current liabilities:
Current portion of long-term debt
$
2,472
$
9,564
Current operating lease liabilities
3,562
3,562
Accounts payable, including retainage
56,589
75,122
Contract liabilities
46,692
44,007
Accrued income taxes
502
1,888
Accrued expenses and other current
liabilities
26,724
24,942
Total current liabilities
136,541
159,085
Long-term debt
19,437
21,528
Long-term operating lease liabilities
13,240
15,643
Other long-term liabilities
1,854
2,858
Total liabilities
171,072
199,114
STOCKHOLDERS’ EQUITY
Common stock, $0.0001 par value;
100,000,000 shares authorized, issued 11,183,076 and 10,471,410,
respectively, and 11,003,424 and 10,291,758 outstanding,
respectively
1
1
Additional paid-in capital
90,992
87,809
Treasury stock, at cost (179,652 shares at
both period ends)
(2,000
)
(2,000
)
Retained earnings
25,137
9,632
Total stockholders’ equity
114,130
95,442
Total liabilities and stockholders’
equity
$
285,202
$
294,556
LIMBACH HOLDINGS, INC.
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
(in thousands)
2023
2022
Cash flows from operating
activities:
Net income
$
15,505
$
2,991
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization
5,751
6,173
Provision for credit losses / doubtful
accounts
186
235
Stock-based compensation expense
3,374
1,980
Noncash operating lease expense
2,843
3,336
Amortization of debt issuance costs
69
100
Deferred income tax provision
(1
)
(1,077
)
Gain on sale of property and equipment
(28
)
(262
)
Loss on early termination of operating
lease
—
849
Loss on change in fair value of contingent
consideration
464
1,151
Loss on early debt extinguishment
311
—
Gain on change in fair value of interest
rate swap
(153
)
(298
)
Changes in operating assets and
liabilities:
Accounts receivable
21,896
(21,906
)
Contract assets
14,014
18,597
Other current assets
(1,459
)
698
Accounts payable, including retainage
(18,703
)
(53
)
Prepaid income taxes
95
(101
)
Accrued taxes payable
(1,386
)
1,763
Contract liabilities
2,312
15,810
Operating lease liabilities
(2,803
)
(3,264
)
Accrued expenses and other current
liabilities
1,997
(3,612
)
Payment of contingent consideration
liability in excess of acquisition-date fair value
(1,224
)
—
Other long-term liabilities
400
(130
)
Net cash provided by operating
activities
43,460
22,980
Cash flows from investing
activities:
ACME Transaction, net of cash acquired
(4,883
)
—
Proceeds from sale of property and
equipment
370
442
Purchase of property and equipment
(1,720
)
(725
)
Net cash used in investing activities
(6,233
)
(283
)
Cash flows from financing
activities:
Payments on Wintrust and A&R Wintrust
Term Loans
(21,452
)
(11,571
)
Proceeds from Wintrust Revolving Loan
10,000
15,194
Payments on Wintrust Revolving Loan
—
(15,194
)
Payment of contingent consideration
liability up to acquisition-date fair value
(1,776
)
—
Payments on finance leases
(1,991
)
(2,051
)
Payments of debt issuance costs
(50
)
(427
)
Taxes paid related to net-share settlement
of equity awards
(847
)
(363
)
Proceeds from contributions to Employee
Stock Purchase Plan
313
265
Net cash used in financing activities
(15,803
)
(8,754
)
Increase in cash, cash equivalents and
restricted cash
21,424
13,943
Cash, cash equivalents and restricted
cash, beginning of period
36,114
14,589
Cash, cash equivalents and restricted
cash, end of period
$
57,538
$
28,532
Supplemental disclosures of cash flow
information
Noncash investing and financing
transactions:
Earnout liability associated with the ACME
Transaction
$
1,121
$
—
Right of use assets obtained in exchange
for new operating lease liabilities
1,043
—
Right of use assets obtained in exchange
for new finance lease liabilities
4,062
2,171
Right of use assets disposed or adjusted
modifying operating lease liabilities
(643
)
2,396
Right of use assets disposed or adjusted
modifying finance lease liabilities
(77
)
(77
)
Interest paid
1,482
1,425
Cash paid for income taxes
$
6,718
$
768
LIMBACH HOLDINGS, INC.
Condensed Consolidated Segment
Operating Results (Unaudited)
Three Months Ended
September 30,
Increase/(Decrease)
(in thousands, except for
percentages)
2023
2022
$
%
Statement of Operations Data:
Revenue:
GCR
$
61,936
48.5
%
$
62,653
51.2
%
$
(717
)
(1.1
)%
ODR
65,832
51.5
%
59,704
48.8
%
6,128
10.3
%
Total revenue
127,768
100.0
%
122,357
100.0
%
5,411
4.4
%
Gross profit:
GCR(1)
11,970
19.3
%
9,648
15.4
%
2,322
24.1
%
ODR(2)
19,274
29.3
%
15,206
25.5
%
4,068
26.8
%
Total gross profit
31,244
24.5
%
24,854
20.3
%
6,390
25.7
%
Selling, general and administrative(3)
20,967
16.4
%
18,688
15.3
%
2,279
12.2
%
Change in fair value of contingent
consideration
161
0.1
%
386
0.3
%
(225
)
(58.3
)%
Amortization of intangibles
288
0.2
%
386
0.3
%
(98
)
(25.4
)%
Total operating income
$
9,828
7.7
%
$
5,394
4.4
%
$
4,434
82.2
%
(1)
As a percentage of GCR
revenue.
(2)
As a percentage of ODR
revenue.
(3)
Included within selling, general
and administrative expenses was $1.1 million and $0.8 million of
stock based compensation expense for the three months ended
September 30, 2023 and 2022, respectively.
LIMBACH HOLDINGS, INC.
Condensed Consolidated Segment
Operating Results (Unaudited)
Nine Months Ended
September 30,
Increase/(Decrease)
(in thousands, except for
percentages)
2023
2022
$
%
Statement of Operations Data:
Revenue:
GCR
$
190,329
50.9
%
$
200,921
56.9
%
$
(10,592
)
(5.3
)%
ODR
183,330
49.1
%
152,378
43.1
%
30,952
20.3
%
Total revenue
373,659
100.0
%
353,299
100.0
%
20,360
5.8
%
Gross profit:
GCR(1)
33,560
17.6
%
26,700
13.3
%
6,860
25.7
%
ODR(2)
52,424
28.6
%
37,814
24.8
%
14,610
38.6
%
Total gross profit
85,984
23.0
%
64,514
18.3
%
21,470
33.3
%
Selling, general and administrative(3)
62,433
16.7
%
56,113
15.9
%
6,320
11.3
%
Change in fair value of contingent
consideration
464
0.1
%
1,151
0.3
%
(687
)
(59.7
)%
Amortization of intangibles
1,054
0.3
%
1,184
0.3
%
(130
)
(11.0
)%
Total operating income
$
22,033
5.9
%
$
6,066
1.7
%
$
15,967
263.2
%
(1)
As a percentage of GCR
revenue.
(2)
As a percentage of ODR
revenue.
(3)
Included within selling, general
and administrative expenses was $3.4 million and $2.0 million of
stock based compensation expense for the nine months ended
September 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 to Adjusted EBITDA
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)
2023
2022
2023
2022
Net income
$
7,192
$
3,641
$
15,505
$
2,991
Adjustments:
Depreciation and amortization
1,892
2,025
5,751
6,173
Interest expense
437
547
1,615
1,511
Interest income
(377
)
—
(624
)
—
Non-cash stock-based compensation
expense
1,140
806
3,374
1,980
Loss on early debt extinguishment
—
—
311
—
Change in fair value of interest rate
swap
(116
)
(298
)
(153
)
(298
)
CEO transition costs
—
—
958
—
Loss on early termination of operating
lease
—
—
—
849
Income tax provision
2,760
1,654
5,407
1,275
Acquisition and other transaction
costs
225
45
524
243
Change in fair value of contingent
consideration
161
386
464
1,151
Restructuring costs(1)
317
1,398
1,089
4,324
Adjusted EBITDA
$
13,631
$
10,204
$
34,221
$
20,199
(1)
For the three and nine months
ended September 30, 2023, the majority of the restructuring costs
related to our Southern California and Eastern Pennsylvania
branches. For the three and nine months ended September 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/20231108455681/en/
Investor Relations
The Equity Group, Inc. Jeremy Hellman, CFA Vice President (212)
836-9626 / jhellman@equityny.com
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