Fourth Quarter 2018 Earnings Call April 16, 2019 Forward Looking - - PowerPoint PPT Presentation

Fourth Quarter 2018 Earnings Call

April 16, 2019

Forward Looking Statements

2 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, the ability of the Company to successfully remedy the issues that have led to write-downs in its Mid-Atlantic branch, and the benefits expected by the Company’s new senior secured credit facility and revolving credit facility. 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.

Agenda

3

Executive Summary High-level Business Comments Key Initiatives Q4 and FY 2018 Financials Backlog Refinancing Closing Comments

1 7 2 3 4 5 6

4Q/FY’18 Operating Review

Solid Q4 Results; Record Backlog at Year-End

4

• Q4 2018 revenue increased 15.2% year-over-year; Q4 2018 diluted EPS of $0.44
• Year-end backlog at $559.7 million; $380 million of additional promised work not included in backlog
• FY 2018 gross margin ex-Mid Atlantic of 15.2%1; Q4 2018 gross margin of 13%
• Geographic diversity continues to fuel operations as 8 of 10 business units reported [revenue] growth;

seven of 10 delivered strong EBIT Earned Revenue Construction Backlog

$331.4 $447.0 $485.7 $546.5 $131.4 $151.4

$0 $0 $10 100 $20 200 $30 300 $40 400 $50 500 $60 600 201 015 201 016 201 017 201 018 4Q '1 '17 4Q '1 '18

Yea ear-over-Year r Qua uarte rterly rly Gr Grow

• wth

th +15. 15.2% ($ $ in n mi mill llio ions) $326.9 $378.1 $434.3 $461.4 $505.5

$30 300 $35 350 $40 400 $45 450 $50 500 $55 550 201 014 201 015 201 016 201 017 201 018

($ $ in n mi mill llio ions)

2

1 Ex-Mid-Atlantic calculations eliminate 2018 unit revenues of $105.7 million and negative gross profit of $7.6 million.

$10.0 $11.3 $12.9 $14.7

$0 $0 $4 $4 $8 $8 $12 12 $16 16 201 015 201 016 201 017 201 018

4Q/FY’18 Operating Review

Service Operations

5

($ $ in n mi mill llio ions)

2

Service Segment Revenues Maintenance Base

$57.8 $82.2 $94.4 $108.3 $23.5 $33.1

$0 $0 $20 20 $40 40 $60 60 $80 80 $10 100 $12 120 201 015 201 016 201 017 201 018 4Q'17 17 4Q'18 18

($ $ in n mi mill llio ions) Gr Grow

• wth

th +40. 40.7%

• FY 2018 Service revenue of $108.3 million represents growth of 14.7% versus the prior year period; Q4

2018 Service sales rose 40.7% year-over-year

• Seeing traction with national, multi-location facility owners
• Maintenance base continues to build, with solid pull-through revenues

LEAP Initiative

Limbach Energy Assessment for Performance

6 LEAP is a data-analytics platform that improves the efficiency of clients’ existing facilities. Utilizing LEAP, facility owners realize reduced utility costs and are able to demonstrate responsible environmental

• stewardship. LEAP offers utility bill management, real-time monitoring of utilities; analysis from Limbach’s

in-house engineers; resource management; advice and analysis on future capital expenditures; and benchmarking of Key Performance Indicators. Clou loud-based Utilit tility y Mon

• nit

itor

• rin

ing ➢ Benchmarking ➢ Energy Star ➢ Improvement Tracking LED LEDS S Ener Energy Engin Engineerin ing ➢ Highly Experience ➢ Performance Analysis ➢ Consultation ➢ LEED Certification Compliance Ener Energy y Solu

• lutio

tions Pr Proje

• jects

➢ Energy Auditing ➢ ECM Identification ➢ Project Development ➢ Measurement & Verification LEAP Program Components

2

4Q/FY’18 Operating Review

Operations excluding Mid-Atlantic Business Continue to Perform

7 Excluding the Mid-Atlantic business unit: ✓ Revenue was in-line with Plan revenue ✓ Gross margins were 10 bps ahead of Plan, and 430 basis ahead of the consolidated ‘as reported’ figure ✓ EBIT was 44% ahead of plan

2

($ in millions)

Excluding Mid-Atlantic Business Unit As Reported As Reported FY 2018 Plan Earned Revenue $546.5 $440.8 $440.1 Gross Margin 10.9% 15.2% 15.1% EBIT $0.8 $15.3 $10.6

✓ ✓ ✓

FY 2018

Management Initiatives

Continuing to make significant investment in people

8

3

• Installing key metrics for all production. The piloted program has proved to be

very successful in increasing profitability and reducing write downs

• Orlando business units using 90% of pre-fabricated or pre-cut assemblies.

✓ Reduces field labor costs ✓ Will look to utilize this approach in other business units

• Assembling a business plan in 2019 to consider building modular

manufacturing.

• Limbach Leadership and Development Program (LLDP) inaugural class began

in January 2019. The LLDP program is designed to build bench strength of Limbach leaders for further expansion.

• Our 2018 Limbach Employee We Care Survey once again noted we are a

strong respected employer.

• Receiving recognition as a “Best Places to Work” in 2019.
• Reorganized the Operations with the introduction of the Co-COO role to better controls, improve

accountability and oversight across the portfolio of business units. Also added to additional operational managers to provide audit of processes, coaching or new team members and to identify potentials risks and opportunities.

• Limbach University was expanded in 2019 with advancing training and development programs,

including updated curricula, new online training and increased frequency of programs. We have a goal of 24 hours of training for all staff members.

Specific Activities Designed to Support Workforce and Improve Efficiency

Financial Review - Details

9

• Q4 2018 revenue increased 15.2% year-over-year; Construction revenue up 9.6%; Service revenue up

40.7%

• FY 2018 gross margin ex-Mid Atlantic of 15.2%1; Q4 2018 gross margin of 13%
• Q4 2018 Net Income of $3.4 million, or 44 cents per diluted share

Earned Revenue Gross Profit and Gross Margins

$331.4 $447.0 $485.7 $546.5 $131.4 $151.4

$0 $0 $10 100 $20 200 $30 300 $40 400 $50 500 $60 600 201 015 201 016 201 017 201 018 4Q '1 '17 4Q '1 '18

Yea ear-over-Year r Qua uarte rterly rly Gr Grow

• wth

th +15. 15.2% ($ $ in n mi mill llio ions) $45.4 $55.7 $65.6 $59.4 $67.0

$20 20 $40 40 $60 60 $80 80 201 015 201 016 201 017 201 018 201 018 8 ex ex- MA MA

($ $ in n mi mill llio ions)

4

10. 10.9% 13. 13.5% 12. 12.5% 13. 13.7%

Gro Gross s Marg rgin

15. 15.2% 1 Ex-Mid-Atlantic calculations eliminate 2018 unit revenues of $105.7 million and negative gross profit of $7.6 million.

Financial Review - Details

Construction Operations

10

($ $ in n mi mill llio ions)

4

Construction Segment Revenues Construction Backlog

$273.6 $364.8 $391.4 $438.2 $107.9 $118.3

$0 $0 $50 50 $10 100 $15 150 $20 200 $25 250 $30 300 $35 350 $40 400 $45 450 $50 500 201 015 201 016 201 017 201 018 4Q'17 17 4Q'18 18

($ $ in n mi mill llio ions) Gr Grow

• wth

th +9. 9.6%

• FY 2018 Construction revenue of $438.2 million, up 12% versus the prior year period; Q4 2018

Construction revenues rose 9.6% versus the prior year period

• Focused on optimizing customer mix with an emphasis on direct relationships with building owners
• Continuing to focus on expansion in Mission Critical – awarded next phase of hyper data center project

$355.4 $390.2 $461.4 $505.5

$0 $0 $10 100 $20 200 $30 300 $40 400 $50 500 $60 600 201 015 201 016 201 017 201 018

Financial Review - Details

Service Operations

11

($ $ in n mi mill llio ions)

4

Service Segment Revenues Service Segment EBIT

$57.8 $82.2 $94.4 $108.3 $23.5 $33.1

$0 $0 $20 20 $40 40 $60 60 $80 80 $10 100 $12 120 201 015 201 016 201 017 201 018 4Q'17 17 4Q'18 18

($ $ in n mi mill llio ions) Gr Grow

• wth

th +40. 40.7%

• FY 2018 Service revenue of $108.3 million represents growth of 14.7% versus the prior year period; Q4

2018 Service sales rose 40.7% year-over-year

• Segment backlog at December 31 of $54.2 million
• Focused on aggressively growing our Service business by incorporating technology

$3.4 $5.7 $6.6 $7.8 $2.6 $3.1

$0 $0 $1 $1 $2 $2 $3 $3 $4 $4 $5 $5 $6 $6 $7 $7 $8 $8 $9 $9 201 015 201 016 201 017 201 018 4Q'17 17 4Q'18 18

($ $ in n mi mill llio ions) Gr Grow

• wth

th +22. 22.0%

Backlog

Record Construction Backlog at Year End

12

• ~60% of current Construction backlog ($505.5 million) is scheduled to be converted to revenue in 2019,

providing excellent current year visibility

• $380.2 million of promised opportunities not yet booked to backlog
• Announced $81.4 million of hospital contracts subsequent to year-end, further strengthening healthcare

presence

• Recently awarded contract for next phase of construction at hyper data center

5

Construction Segment Backlog Breakout

$505.5 $380.2 $0 $250 $500 $750 $1,000 $1,250 Construction Backlog at December 31 Promised/Committed but Unbooked 2019 2020 2021+

60% Coverage of initial 2019 Construction Forecast Backlog + Promised Available for 2020 and Beyond ($ in millions)

Balance Sheet/Refinancing

13

• New syndicated senior term loan provided by Colbeck Capital
• New $15 million revolver with Citizens Bank to provide working capital and support organic growth
• $40 million capacity fully-funded at closing for existing debt payoff, fees, and cash to balance sheet; $25

million delayed draw term loan to support acquisitions

• Interest rate of LIBOR +800 basis points (fixed spread)
• No amortization for 18 months, allowing Limbach to enhance near-term cash flow

6

($ in millions) As of April 12, 2019 December 31, 2018 December 31, 2017

Pro-forma unaudited

Cash 8.5 1.6 0.6 Working Capital 22.8 12.7 30.8 Intangible Assets, Net 13.0 13.0 14.2 Net Under/(Over) Billings (18.1) (18.1) 4.5 Revolver

• 5.7

Old Bridge Loan

• 7.7
• Old Term Loan
• 14.3

17.6 New Term Loan 40.0

• Vehicle Leases

5.1 4.1 3.8 Equity 46.4 46.4 48.2

Closing Comments

14

7

• Lessons learned during 2018 are expected to serve us well in 2019

and beyond

• Strengthened the leadership team with more oversight with

improved controls

• Focus on operational excellence in Construction
• Continuing rapid expansion of Service offerings
• Introduced new energy monitoring & predictive analytics

technology to our services offering

• Expanding prefabrication and evaluating modular manufacturing
• pportunities
• We expect to issue guidance for FY 2019 on our upcoming Q1

earnings call

Indic ndicato tors and nd Outlo utlook4

Source: FMI U.S. Construction Outlook Fourth Quarter 2018 Report. Totals may not foot due to rounding.

1

Figures represent percentages of project revenue between January 1, 2015 and March 31, 2018. Other key end markets include Central Utility Plants (3.4%), Multi-Family Residential (3.3%) and Other (8.9%).

2

As of March 31, 2018. Other key end markets include Central Utility Plants (1.4%), Multi-Family Residential (7.4%) and Other (6.3%).

3

Includes data center activity.

4

Source: Dodge Momentum Index per Dodge Data & Analytics and Architecture Billings Index per The American Institute of Architects.

Favorable Industry Outlook

FMI Data Continues to Suggest Strength

Growth forecast across multiple markets – LMB Core Sectors highlighted below

Con

• nstructio

ion For

• recasts

ts

Percentage Change from Prior Year 2017 017 Act ctual 2018 018 Act ctual 2018F 018F- 2022F 022F CAGR % % of LMB B Re Reven venue1 % % of Curr urrent nt Backlog

• g2

Total No Non-res esiden ential Bui uildi dings gs 2.0% 0% 6.3% 3% 2.4% 4% Healthc hcare 4.4% 4% 0.6% 6% 2.6% 6% 27.4% 32.6% Educat ducation

• n

1.0% 0% 6.1% 1% 4.4% 4% 16.4% 7.2% 2% Amusement & Recreation 7.3% 8.1%

• 0.1%

1.8% 6.9% Of Office3 (1.1) 1)% 10.8% 0.6% 6% 9.7% 7% 20.8% Tran ranspor portation

• n

4.4% 4% 16.2% 7.7% 7% 7.5% 5% 10.7% Commercial 12.3% 1.7% 0.8% 5.8% 4.1% Lodging 6.3% 14.2% 2.6%

• 0.9%

0.5% Emer ergi ging g Oppor Opportun unity Sector

• r for

r LMB Manufacturing

• 13.0%

2.5% 2.6% 0.9% 2.1%

15

Score

• res grea

eate ter r tha han n 50 50 equ qual l exp xpansio ion

7

Source: FMI U.S. Construction Outlook Fourth Quarter 2018 Report.

Construction Put-in-Place: Core Markets

Healthcare Manufacturing Transportation Education

$30,000 $40,000 $50,000 $60,000 2016 2017 2018 2019 2020 2021 2022 ($ in millions) $80,000 $90,000 $100,000 $110,000 $120,000 $130,000 2016 2017 2018 2019 2020 2021 2022 ($ in millions) $60,000 $65,000 $70,000 $75,000 $80,000 $85,000 2016 2017 2018 2019 2020 2021 2022 ($ in millions) $30,000 $45,000 $60,000 $75,000 $90,000 2016 2017 2018 2019 2020 2021 2022 ($ in million)

Favorable Industry Outlook

16

0.9% CAGR 2.6% CAGR 4.4% CAGR 7.7% CAGR

7

17

Q&A

18

Appendix

19

* Use of 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 (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

• perations 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 Adjusted EBITDA to net income (loss), the most comparable GAAP measure, is provided below.

Non-GAAP Reconciliation Table

For the Three Months and Years Ended December 31, 2018

Reconciliation of Net income (loss) to Adjusted EBITDA Three months ended December 31, For the years ended December 31, (in thousands) 2018 2017 2018 2017 Net income (loss) $ 3,374 $ 1,129 $ (1,845) $ 712 Adjustments: Depreciation and amortization 1,467 1,735 5,683 9,118 Interest expense 951 472 3,305 2,034 Loss on debt modification 335

• 335
• Non-cash stock-based compensation expense

496 739 2,159 1,656 Income tax provision (benefit) 301 3,503 (635) 3,151 Adjusted EBITDA $ 6,924 $ 7,578 $ 9,002 $ 16,671