Limbach Holdings (LMB) Tops Q3 EPS by 23c, Revenues Beat; Offers FY20 Revenue Mid-Point Guidance Above Consensus

Limbach Holdings (NASDAQ: LMB) reported Q3 EPS of $0.31, $0.23 better than the analyst estimate of $0.08. Revenue for the quarter came in at $163.9 million versus the consensus estimate of $147 million.

The following are key financial highlights of the third quarter. All comparisons are to the third quarter of 2019, unless noted otherwise.

• Construction segment revenue of $130.5 million increased 10.2% driven by growth in the Michigan, Ohio, and New England operating regions, offset by revenue declines in the Florida, Southern California and Eastern Pennsylvania regions. Service segment revenue of $33.4 million increased 12.3%, driven by growth in the Florida, Mid-Atlantic and Western Pennsylvania regions, offset by a revenue decline in the Michigan region.
• Gross margin increased to 14.8% from 12.4%, primarily as a result of improved project execution in the Construction segment and improved pricing and business mix in the Service segment. Gross margin in the Service segment was 27.9% representing an increase of 360 basis points.
• SG&A expense in the third quarter increased approximately $0.4 million to $17.0 million as compared to $16.6 million as the Company continued to invest in Service segment and owner-direct sales and execution resources. That growth in SG&A expense was offset by a decline in Construction segment and Corporate SG&A which reflects the continuing effort to identify cost reductions undertaken earlier in the calendar year. As a percent of revenue, SG&A expense was 10.4% as compared to 11.2%.
• Interest expense was $2.2 million in the third quarter of 2020 as compared to $1.8 million as the Company paid higher interest rates under the Company’s term loan following the execution in the third quarter of 2019 of an amendment to its credit facility.
• Net income in the third quarter was $2.5 million compared with a net loss of $(3.0) million. Diluted EPS increased to $0.31 as compared to $(0.39).
• Net cash provided by operating activities was $12.8 million in the third quarter, as compared to net cash used in operating activities of $(1.9) million.
• Total backlog at September 30, 2020 was $469.3 million as compared to $470.6 million as of June 30, 2020 and $561.2 million as of December 31, 2019. At September 30, 2020, Construction segment backlog accounted for $407.5 million of the consolidated total. Service segment backlog accounted for $61.8 million of the consolidated total.

Charlie Bacon, Limbach’s President and Chief Executive Officer, said, “Overall, we experienced a more normalized operating environment during the third quarter. Our strong performance on a consolidated basis reflected continuing improvement in execution in the Construction segment. We expect that dynamic to continue over the coming quarters as older, lower-margin projects are completed and are replaced with higher margin opportunities that better reflect our enhanced risk management paradigm. We’re pleased with the quality and quantity of the mid-size and large project opportunities we are negotiating and booking into backlog and remain disciplined about project selection. We also generated sequential growth in the Service segment where the impact from COVID-19 had been most significant earlier this year. The velocity we experienced in the Service segment this quarter better reflects what we consider to be a run-rate level of activity, and we’re obviously pleased with the continued expansion in margins.”

GUIDANCE:

Limbach Holdings sees FY2020 revenue of $560-600 million, versus the consensus of $567.46 million.

For earnings history and earnings-related data on Limbach Holdings (LMB) click here.

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