Q2 2019 Revenues of $132.8 million; Aggregate Backlog of $586.2 million at Quarter End

Conference Call Scheduled for 9am ET on August 15, 2019

PITTSBURGH--(BUSINESS WIRE)--Limbach Holdings, Inc. (NASDAQ:LMB) (“Limbach” or the “Company”) today announced financial results for the quarter ended June 30, 2019. Total Q2 2019 revenues were $132.8 million as planned activity reduction in one geographic region (each a “Business Unit”) offset solid growth across others. Q2 2019 Gross Margins were up from the prior year at 13.1%, versus 11.3%. Year to date Operating Income was $4.0 million compared to an operating loss of $0.9 million last year for the same period.

Other key highlights of the quarter included (unless noted, all financial comparisons are to the prior-year quarter):

• The Mid-Atlantic region recorded a second consecutive profitable quarter as the turnaround plan implemented in 2018 drove improved project execution at a lower revenue run-rate compared with 2018.
• Limbach continues to see strong proposal activity and demand in its key industry verticals, led by Healthcare where the Company was awarded three new hospital projects in Florida and one in Ohio.
• Limbach continues to opportunistically broaden its in-field capabilities. During 2018, the Company began offering plumbing services alongside its other construction capabilities in its Southern California and New England regions.
• Aggregate backlog at June 30, 2019 was $586.2 million. Current backlog consists of $536.8 million of Construction work and $49.4 million of Service work. Limbach currently expects approximately $239.5 million of current, aggregate backlog to be recognized as revenue in fiscal 2019.
• The Company is reaffirming 2019 guidance for both revenues and Adjusted EBITDA at $560 million and $22.5 million respectively.

Management Commentary

Charlie Bacon, CEO of Limbach, commented, “Our second quarter featured good news on multiple fronts – proposal activity and sales in our key end market verticals continue to be very good; gross margin was up nicely from last year’s second quarter; and our Mid-Atlantic region continues to perform well, with a second profitable quarter in a row.”

Mr. Bacon continued, “Halfway through the year, we are on-track to achieve our full-year goals in terms of operational performance and profitability. Diversity is a key hallmark of our business as we offer a range of construction and service capabilities, marketed to a variety of industry verticals across different geographical regions in the US. Each of our verticals and geographic locations experiences its own, relatively independent supply and demand forces and, based on the activity we are seeing in our markets, we see no let-up in demand.”

Mr. Bacon added, "As we head into the back half of the year, our current expectations are that this year will be similar to prior years, which has seen us realize higher revenues and greater profitability in the second half of the year."

Second Quarter Summary

Revenues
Q2 2019 revenues of $132.8 million were down 4.9% versus $139.5 million for the prior year period, as planned reductions in Mid-Atlantic region revenues offset growth across the Company’s remaining regions. Service segment revenues of $27.8 million were up 7.9% while Construction segment revenues of $104.9 million were down 7.7%. Limbach continues to expect a year-over-year decline in its Mid-Atlantic region Construction revenues as a result of selectively pursuing only higher-margin projects tied to craft labor availability. Construction operations accounted for 79.0% of revenues with Service operations providing the remaining 21.0%.

Gross Margin
Gross margin for Q2 2019 was 13.1%, compared with 11.3% in the year ago quarter. Service segment gross margin improved modestly to 25.1%, compared with 24.4% in the year ago quarter, due primarily to improved project mix along with positive pricing trends. Construction segment gross margin improved to 9.9% for Q2 2019 compared to 8.4% for Q2 2018, due to improved profitability in the Mid-Atlantic region. On a dollar basis, gross profit in the second quarter was $17.4 million, compared with $15.8 million for the prior year period.

Selling, General and Administrative (“SG&A”) Expense
Q2 2019 SG&A expenses were $17.1 million, compared to $13.7 million in the prior year period. The year-over-year increase in SG&A expenses was primarily due to retention payments made to workers, which excluded the senior management team, combined with increased staffing levels. As a percentage of total revenue, Q2 2019 SG&A expenses accounted for 12.9% of total revenues as compared with 9.8% in Q2 2018.

Net Income (Loss)
Net loss attributable to Limbach Holdings, Inc. common stockholders for Q2 2019 was $(1.5) million, compared with net income attributable to Limbach Holdings, Inc. common stockholders of $0.7 million in the prior year period.

Adjusted EBITDA
Adjusted EBITDA was $2.0 million in Q2 2019, compared with $3.9 million in the prior year period. The biggest contributor to the decline was the year over year increase in SG&A expense of $3.4 million, which was offset by improved gross profit levels.

Six Months YTD Summary

Revenues
Year-to-date 2019 revenues of $266.7 million were up 2.5% versus $260.1 million for the prior year period. Construction segment revenues of $209.6 million were down 0.4% while Service segment revenues of $57.1 million were up 15.3%. Construction segment revenues declined slightly due to the planned reduction in Mid-Atlantic region volume along with the substantial completion of a sizable project in the Michigan region since the second quarter of 2018. Increased Construction revenues in the Florida, New England and Western Pennsylvania regions substantially offset the declines noted in the Mid-Atlantic and Michigan regions. Service segment revenue growth was most pronounced in the Florida region as volume increased. Construction operations accounted for 78.6% of revenues while Service operations provided the remaining 21.4%.

Gross Margin
Gross margin for the first six months of 2019 was 14.0%, compared with 11.2% in the year ago period, as margins expanded in both of the Company’s reporting segments. Service segment gross margin was 24.0%, compared with 20.8% in the year ago period due to improved pricing and volume. Construction segment gross margin was 11.3% for the year-to-date 2019 period compared to 8.9% for the comparable 2018 period, with the year over year improvement attributable primarily to the improved profitability in the Mid-Atlantic region along with strong margins on work in the Florida region. On a dollar basis, gross profit for the first six months of 2019 was $37.4 million, compared with $29.1 million for the prior year period.

Selling, General and Administrative Expense
Year to date 2019 SG&A expense was $33.1 million, compared to $29.4 million in the prior year period. The increase in SG&A expense was due to increased staffing; retention payments made to staff; and higher incentive accruals for all staff positions based on the improved year-to-date results. As a percentage of total revenue, 2019 year to date SG&A accounted for 12.4% compared with 11.3% in the prior year.

Net Income (Loss)
Net income attributable to Limbach Holdings, Inc. common stockholders for the first six months of 2019 was $0.6 million, compared with a net loss attributable to Limbach Holdings, Inc. common stockholders of $3.8 million in the prior year period. The main driver of the year over year improvement in Net Income was the improvement in gross margins, offset somewhat by increased SG&A expense.

Adjusted EBITDA
Adjusted EBITDA was $7.6 million for the year to date 2019, compared with $3.0 million in the prior year period. The year over year increase was due primarily to strong year over year performance in first quarter 2019 Adjusted EBITDA as compared to the prior year period.

Backlog
Aggregate backlog at June 30, 2019 was $586.2 million, compared with $559.7 million at December 31, 2018 and $492.5 million at June 30, 2018. The Company also has commitments for $408.4 million of Construction work which has not yet been recorded as backlog. Within the aggregate backlog figures, Construction backlog at June 30, 2019 was $536.8 million, versus $505.5 million at December 31, 2018 and $445.3 million at June 30, 2018. Service backlog was $49.4 million as of June 30, 2019 compared with $54.2 million at December 31, 2018 and $47.2 million at June 30, 2018. The Company expects approximately $239.5 million of total backlog to be converted to revenues within the current fiscal year.

Balance Sheet
At June 30, 2019, the Company had current assets of $184.6 million and current liabilities of $143.0 million, representing a current ratio of 1.29x. Working capital was $41.6 million at June 30, 2019, an increase of $18.7 million from December 31, 2018. Long-term debt was $40.0 million at June 30, 2019, up from $23.6 million at December 31, 2018. The Company had no borrowings against its $14.0 million credit revolver at June 30, 2019.

2019 Guidance
The Company is reaffirming its previously announced revenue and Adjusted EBITDA guidance for 2019, as summarized in the table below.

With respect to projected fiscal year 2019 Adjusted EBITDA, a quantitative reconciliation is not available without unreasonable efforts due to the high variability, complexity and low visibility with respect to taxes and other items, which are excluded from Adjusted EBITDA. We expect the variability of this item to have a potentially unpredictable, and potentially significant, impact on our future GAAP financial results.

Conference Call Details

Access by Webcast
The call will also be simultaneously webcast over the Internet via the “Investor Relations” section of LMB’s website at www.limbachinc.com or by clicking on the conference call link: https://78449.themediaframe.com/dataconf/productusers/lmb/mediaframe/31878/indexl.html. An audio replay of the call will be archived on the Company’s website for 365 days.