ENGINEERING CONSTRUCTION SERVICE Q4 2017 and 2017 Earnings Call April 3, 2018
Forward Looking Statements This presentation contains forward-looking statements 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, capital expenditures or other future financial or business performance or strategies, results of operations or financial condition. 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 Form 10-K filed on April 2, 2018, which is 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 presentation. 2
Key Operating Highlights from 2017 Showcase Projects • Completed Red Wings arena on time and within cost expectations 1 • Pipeline is very strong: Tracking $3.3 billion of opportunities; expect new tax rates to fuel further growth • New wins: Project Turnstile (data center) and Disney (multi-billion dollar expansion plans) Solid Financial Performance • 2017 revenue was ahead of plan and beat the top end of guidance 2 • Construction revenue up 7.3%, and Service revenue up 14.8% • Full year gross margin expanded 100 basis points; 4Q gross margin was 15.9% • As Service business continues to grow, Limbach will continue to experience margin expansion Non-Recurring Expenses are Behind the Company • Limbach incurred a total of $2.8 million of non-recurring expenses, of which the majority were due to the 3 reinforcement of Sarbanes-Oxley compliance and internal accounting capabilities • Excluding these expenses, 2017 Adjusted EBITDA would have approached the top end of guidance Backlog Growth in Construction and Service • Aggregate backlog of $461.4 million at year-end, an increase of 6.2% over the prior year-end 4 • Construction backlog of $426.7 million, and Service backlog of $34.7 million • Approximately $302 million of total backlog expected to be converted to revenue in the current fiscal year Current Industry Comments • Latest FMI data from the 4Q17 survey continues to support industry momentum 5 • Getting ahead of labor trends by establishing Limbach as the employer of choice • Investing in a new training and development center • Internal employee satisfaction survey generated record results in 2017 3
2017 Key Points Showcase Projects 1 • Completed Red Wings arena on time and within cost expectations • Pipeline is very strong: Tracking $3.3 billion of opportunities; expect new tax rates to fuel further growth • New wins: Project Turnstile (Mission Critical) and Disney (entertainment) 4
2017 Key Points Solid Financial Performance 2 • 2017 revenue was ahead of plan and beat the top end of guidance • Construction revenue up 7.3% to $391.4 million, and Service revenue up 14.8% to $94.4 million • Full year gross margin expanded 100 basis points; 4Q gross margin was 15.9% • As Service business continues to grow, Limbach will continue to experience margin expansion Earned Revenue ($ in millions) Gross Profit / Margins ($ in millions) $600 $70 13.5% $485.7 $500 $447.0 $60 12.5% $400 $50 $331.4 $294.4 $40 $300 $65.6 $30 $55.7 $200 15.9% $20 11.3% $100 $20.9 $10 $15.1 $0 $0 2014 2015 2016 2017 Q4 2016 Q4 2017 2016 2017 5
2017 Key Points Non-Recurring Expenses are Behind the Company 3 • Limbach incurred a total of $2.8 million of non-recurring expenses, of which the majority were due to the reinforcement of Sarbanes-Oxley compliance and internal accounting capabilities • Excluding these expenses, 2017 Adjusted EBITDA would have approached the top end of guidance Adjusted EBITDA ($ in millions) $30 $25 $19.5 Excluding $2.8 million in non-recurring expenses the Adjusted EBITDA $20 would have exceeded the top end of guidance at $19.5 million $2.8 $15 $10 $16.8 $16.7 $13.3 $5 $9.0 $0 2014 2015 2016 2017 6
2017 Key Points Backlog Growth in Construction and Service 4 • Aggregate backlog of $461.4 million at year-end, an increase of 6.2% over the prior year-end • Construction backlog of $426.7 million; Maintenance Base continues to expand driving “pull - through” revenue • Approximately $302 million of total backlog, or 65%, expected to be converted to revenue in fiscal 2018 Construction Backlog Service Revenue ($ in millions) ($ in millions) $450 Maintenance Base Pull-Through Revenue $426.7 $100 $425 $80 $400 $390.2 $60 $375 $81.6 $70.9 $40 $342.8 $350 $47.7 $40.9 $20 $325 $12.9 $11.3 $9.1 $10.0 $300 $0 Q4 2015 Q4 2016 Q4 2017 2014 2015 2016 2017 7
2017 Key Points Current Industry Comments 5 • Latest FMI data from the 4Q17 survey continues to be positive • Getting ahead of labor trends by establishing Limbach as the employer of choice • Investing in a new training and development center • Internal employee satisfaction survey generated record results in 2017 8
Key Operating Highlights from 2017 Revenues Gross Margin Construction Service • • • • Consolidated Consolidated gross EBIT from EBIT from Service earned revenue profit in 2017 Construction operations increased $38.7 increased by 17.9% operations increased by $1.2 million, or 8.7% over 2016 to $65.6 increased by $3.2 million, or 20.3% over 2016, to million million, or 20.3% • Gross profit $485.7 million, a • • Gross margin of Gross profit increased by $3.3 record for the 13.5% exceeded increased by $6.7 million, or 18.8% Company in its 2016 performance million, or 17.5% • Gross margin of current form by 100 bps • Gross margin of 22.1% reflected an • Construction 11.4% reflected an increase of 80 bps revenues increased increase of 100 bps over 2016 7.3% to $391.4 over 2016 • Contractual million maintenance base • Service revenues increased by increased 14.8% to 14.2%, providing a $94.4 million large source of pull- through revenue 9
Key Operating Highlights from 2017 Backlog Key Projects EPS SG&A • • • • For the full year, Non-recurring At December 31, Successful SG&A expense was Deferred Tax construction completion of the $56.0 million, up Valuation backlog totaled Detroit Red Wings $7.6 million from adjustment of $1.7 $426.7 million, an arena in Michigan, the prior year million in Q4 increase of $36.5 the largest single million (9.4%) over project in the • • Included in our Q4 diluted EPS of Company’s history the prior year SG&A expense $0.12, inclusive of at $102.8 million • were $2.8 million of DTA charge 65% of total • Award of Limbach’s non-recurring backlog expected to • Diluted EPS of expenses related to be earned in 2018, first substantial data ($0.13) for the full- SOX compliance providing significant center project, a year and accounting visibility into current market with • Diluted EPS of build-out year performance attractive growth $0.10 for the year prospects (excluding DTA) as compared to diluted EPS of ($0.19) in 2016 10
Key Financial Data – Balance Sheet ($ in thousands) As of December 31 2017 2016 Variance Cash $626 $7,406 ($6,780) Working Capital $30,776 $28,454 $2,322 Intangible Assets, Net $14,225 $17,807 ($3,582) Total Debt $26,914 $25,983 $931 Equity $48,160 $47,448 $712 Working capital increased $2.3 million compared to December 31, 2016, an 8.2% increase year-over- year, reflecting continued growth in revenue Completed the first phase of the repurchase of the Preferred Stock for $4.1 million; full repurchase completed in January 2018 for an additional $9.97 million In compliance with all Credit Agreement covenants at year-end Total debt increased by $0.9 million, net of amortization and the incremental borrowing of $4.1 million to fund the partial repurchase of the Preferred Stock in July 11
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