Limbach (LMB) 9 Mar 232022 Q4 Earnings call transcript

Greetings, and welcome to Limbach Holdings Fourth Quarter and Full Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jeremy Hellman of the Equity Group. proceed. Please

the much, quarter everyone. results www.limbachinc.com. also and its Section XX-K company very announced Limbach and the like good XX, of available Form fourth December on an its fiscal for presentation to and note you company at updated Yesterday, morning, Holdings filed XXXX. that Thank The ended investor would is year website year Investor XXXX the

review the will and to Management to encourages during select in call today's presentation refer slides entirety. its investors

the this results or forward-looking projections differ During discussion market be and may providing company forecasts, call. contain call, will conditions. similar reviewing statements an statements, may current results any those and made actual update during on from earnings Today's the

review XX-K the the Also, on the XX-Q questions session taking of the to that on Form call, actual report annual forward-looking the during and end during from the earnings from risk differ reports will analysts. statements reminded be factors may only Form for we our company's made results call. are that cause note at quarterly Listeners please question-and-answer to

Limbach that, Please With the to of over Bacon, go President turn and Officer Executive ahead, call the Charlie. Chief Charlie I'll Holdings.

and and everyone, for joining us. morning, Good welcome, thanks

for exceeded Mike upper Incoming-CEO; partly Chief and adjusted and another end me our this Joining of morning is year. Jayme the guidance and reported EBITDA quarter McCann, the solid Brooks, our COO Financial We've our Officer.

or the well it, as to game-changing segment, EBITDA call the installed risk and of we For as and Contractor the management past or of several that as General owner-direct we focusing expanding met backlog. our strategy the our we GCR years, the our business on revenue rapidly in guidance, exceeded quality ODR have I credit or adjusted practices

One project demonstrate all from improving and produced event one which revenue like helps to to have for working. claims on our with successfully $XX significant earnings is being growth, is better of results steadily to during million cash ODR cash. I'd rapid expect approximately position, coupled selection comment our strategy our significant resolved we GCR collect our QX, of led financial The in a

There are outcomes. are to and two million, yet exceed we opportunities patiently that those that maximize $XX aggressively working matters legacy remain our

As be my you will role other this earnings to take conversation. Limbach, on life be trying as leading XX stepping know, CEO the call to years challenges the last up CEO that Mike March and it's will some offers. on opportunities After of XX.

of ready over work this the The with for done career. my getting the of years past highlights full is and I one he three have my support the of Board

CEO well. I have selection think executed we the

the together to addition leadership Mike In of build succession out been the senior Board. have full to with support work, and I the planning working team a

built strong of have We a leaders. team and capable very

strongly that I'm the We the chapter, the value next deployed which has generation. happy will handing we cash positioned Mike strategy, company its creation, one leadership - to expansion believe and have for CEO as be leadership. forward the off Limbach of to be of to of next this extremely watching care a company to position. the greatly and sizable that of I all transitioning under role look the and to shareholder forward and my company employees well chapter a Mike's look from with about

the share as XXXX. for over as the full and the call now well me to and the results quarter of turn year the Mike Let Jayme to outlook

our has me vision. our support we've that and some last in excited I been CEO. It's you, ODR for new investor note Limbach Charlie. and presentation about as also set plans Directors years Board of I'm to over motion. transformation you, our especially as with about want few working Thank our thank expanded pleasure their a discussions appointing the for the

to analysts. want our comments will our and lies our to questions with I'll provide in financial open to performance from return before up high-level results, highlights, what Turning some then to further Jayme I follow discuss on XXXX. ahead some we

we quarter year guidance fourth that with noted, adjusted strong EBITDA exceeding the in closed Charlie resulted year. a for As the

marks year guidance exceeding is which bottom third item, of our direct we this for That line the or line think performance. consecutive meeting of on a result our emphasis

continues segment on growing project GCR. to criteria continue We emphasis in selection as on aggressively in pushing GCR, be expected contraction. a, an modest focused top while margins our primary the to OTR result Within line margins

driving segment. execution results In quality gross as rigorous gone the the margins our field, improved in demonstrate, selection in project hand-in-hand with GCR, criteria, has

of Given to that to XX% X XX%, Page the margin updated investor on shows deck, summarized which which GCR gross range segment. our gross target along our of with XX% target margin have to our is XX% makeup success, range our we backlog, per from

of terms additional any equipment and which fourth shy the in our longer-range came on in focused consolidated of delays deterioration revenue our visibility the just put guidance equipment don't guidance is Our chain-driven late remain capital equipment. supply this by in quarter XXXX. and revenue We the in planning chain existing think delays, highly and from those of to yearly providing area, primarily indicate which some delivery driven into customers be maintaining need range, conditions supply proactive both in

paradigm service has noted our calls, for this couple strong capabilities. maintenance resulted we have and demand in on As of our last

Our they systems. to where to need customers cannot mechanical due in often broken position they simply close where have facilities a be

facilities mission-critical. keep most those for As end plenty operational. systems especially of work we deck, and time driving infrastructure shown work importantly, good of we as are support, is X seek attributes investor us, the market trends material favorable demographic This on the Page is the key secular and

we believe continued represents Limbach. this also Over capital of demand to mid long-term, replacement the equipment deferment for pent-up

in to few. with verticals data positive change As demand equipment a primary the consider healthcare, strong for equipment anticipate R&D Among we look are supporting our facilities customers attributes our provide markets, working to becomes outs. available, we centers, those the we cite

improved directly development positively infrastructure contributing not to allowing margins. in curve does impact In for markets labor, it's but skilled an us, some realize our to positive demand overall us adjacent cases,

pass provide now to I'll with vision before some address in off the questions. company regarding to to macro it highlights, and for some outlook along the XXXX, return comments take we Jayme for Jayme? then my our guidance financial I'll

Thanks, Mike.

Our press our release and Form XX-K, detail on filed financials. which was will extensive provide yesterday,

I'll key profit consolidated to for And full for So accounted our Overall, transition segment revenue more to the ODR up ODR year. focus importantly, consolidated year. segment well the with on the of gross of some the the highlights. the track XX.X% ODR XX.X% for continues

quarter. for EBITDA EBITDA the million, year $XX.X the resulting quarter million, the of We exceeded our adjusted which closed adjusted Most solid in year with was end the fourth full for notably, $XX.X guidance. high a of

a of adjusted for quarter as approximately and conversion flow cash the free EBITDA for the XX% XX% percentage was full Our year.

quarter be ago underpinned on to Focusing margin in the segment, positively. the revenue quarter. strategic XX.X% ODR on margin continued fourth XX.X%, higher-margin gross XX.X%. our the for XX.X% of year which trend full resulting focus statement, our gross to fourth continued Consolidated in gross year accounted by success consolidated up compared with the during income This was to our of margin quarter

in for SG&A XX.X% expense $X.X As for the Full the up quarter in year, ODR year the $XX.X XX.X% $XX.X year ago fourth XXXX. million, million million year. up from consolidated period. of SG&A up earlier, from was I was mentioned full expense accounted million, $X from That's revenue. the prior

from Digging expense net the our the the effect the of SG&A million in approximately year of Jake XXXX into to SG&A, of was significant entities, driver increase is the the full majority Marshall which increase million. from $X.X $X.X XXXX

XXXX, investments ODR supported reflected the and strategic segment, of We of SG&A in have staff. in which mostly made also are consisting salespeople the

those been than case more value with to Given selling GCR, small year. drive it the transactional revenue that grow has increased and for factor the margins segment's in of hitting the those historically were the investments general profile a and SG&A quicker also full relationships, support dollar work and requires

a be than percentage first of in is half with XXXX. in rate as first our expense looking to year will higher should of revenue expected to revenue the XXXX cause which year, the revenue of percentage at the SG&A SG&A, in half year of the stronger to When similar a be year. model half the a second to the run prior our Consistent full

non-recurring These costs January. net will and first of In the QX. $X year and costs adjustment of the half in run an EBITDA be calculation that over SG&A million majority income will costs impact and expected be the include succession associated CEO to with to will addition, are announced through the costs in earnings. will was These the our with hitting transition

$X approximately are impacted our The during taxes in XXXX, SoCal us. took and Eastern and earnings income by before distractions the in to place costs restructuring operation of segment majority GCR our negatively wind-down Additionally, income our Pennsylvania that those behind million.

have some continuation been up into delays see certain in of projects some will and costs wrapping XXXX. and there However, we claims,

Once completed, margins. expect also acquisition XXXX. those and, on impacted of our income positive fair we see and to earnings impact gross Jake the The Marshall a particular, consideration in in negatively contingency business for are value net

However, target Marshall well as the XXXX, it is positive met earned for earn-out the of was the by planned very EBITDA fact was year. team that their they Jake the exceeded as first as XX, December

sheet. the on we the expect of For accrued earnout already expense as for earnout the to majority XXXX, is related balance minimal XXXX the

we expect trailing have discussed general EBITDA annual our a to viewed cash to, flow before an Turning on thumb, to continue cash when we free of XX-month flow, period. approximately of as be rule as our adjusted XX% conversion or

the volatile nature flows cash given short of be can Just periods. our business, over

or cash performance. focus on we to XX-month longer really period our everyone So when urge evaluating flow

intended term At XX, to is reduction continues quarter was flow ODR and of flow and operating XXXX. the finish total us Fourth was primary use year paid $XX was the our debt $XX.X cash to The outstanding of allowing Our balance zero. $XX.X million, debt million. full be of down debt. cash we flow our million debt during operating cash net $XX.X cash on shift total effect the cash was with million million generate We the operating performance. year having of $XX.X December

$X used our shares program, also million common QX XXX,XXX repurchase stock. on our share repurchasing We of approximately during

sheet income also December outstanding that was the value for was Charlie in billed Therefore, statement QX to XX. contract claim amount is account balance to now carrying impact and of September receivable as of there the on we was mentioned, our settled which As the one in accounts the claims the XX. equal customer in included of asset as the the QX, no of in

when a receivable We year. claims expect for outstanding value two This the of this those half the in actually remind $XX terms timing the is of I'll that is gross payment the we of be cash the will something with settlement outcome cash first amount, million everyone of the approximately north to collected. And $XX settlement including total of forecast, negotiations receive cannot the million. of the

cash continue our sheet capital strong. Our needing business And acquisition free expect to expected of the with as our balance repurchase have Board equity And strategy, continue to to flow, without strategic and flexibility to discuss to currently part evaluate with programs to we pursue is we additional program of turn the allocation financing. to our yield share Directors.

Mike. back I'll to now hand it

Jayme. Thank you,

noted As we XXXX. introducing press for are our in financial release, guidance

We be $XXX year range to million. of $XXX revenue full expect million the in to

$XX We our few also are next key the for note. expect outlook million. to to drivers to also million range $XX there in and confidence a Underpinning adjusted years, the several XXXX EBITDA from

needs maintenance Demand favorable. the their so and being remains macroeconomic systems very with customers to industry where for foreseeable building is - our working of service are future. also retrofit, Limbach is regardless the expected mission-critical construction remain disciplined strong on focused outlook in for the of have and environment. and First,

large avoid upgrades. In and but owners to can equipment these can't immediate of type repairs. buildings, of the between they allows This flex defer repairs us capital existing expenditures, infrastructure

our of rests creates a Limbach differentiated engineering, thesis of customers. true of craft - for leg combines our that value labor on based business positioning partner on second The all our and which a model approach,

building elements of emphasize to a differentiated we're and model non-residential want think construction, that point data service property we services, traditional analytics - and combines unique energy maintenance, as I this management. creating

those talked through provision relationships have We about some these to cross-disciplined relationships, as be services. we those our products my CEO indispensable and will work partner focus customers for to and squarely of on maximizing our time as an customer be

we margin as our further a on from opportunity relationships customer trusted transactional expansion. reactive XX, adviser, relationship shown Slide have evolve building an to As to owner proactive expect for

assets drive few us here We at on have to base delivering we've built customer an very the them allows tremendous focused are that value over for years return last Limbach. appropriate our on and

our Third, well investing plan. and our acquisitions to the our growth flexibility dynamics, We've to reduce shape, improve balance sheet is a our providing in us attack also lot in cash to business. done quality of strategic which us excellent while our pursue sets strategic risk

We ensuring have built proper we'll - synergy but that continue to acquisition our potential pipeline be each large very with opportunities, a of strategy. the has selective,

our We from learned lot Marshall. successful Jake integration a with

built have those and team, principles integration apply looking same We an some acquisitions. be future of we'll to and

maintenance to need and response their clear supply Page where the selling the standard there market, to a chain we is four consider to shown of implementation investor have mindset. of of in niche-based areas more the deck, acquisition, operating recent XX owners attuned the on improve it of to state building decision-making, earnings post value-added systems. solution in for As systems, particular stop When look that are service and owners issues, customer in building data-driven to we key of years become quality

This has from these to for indispensable become here created physical our assets. us partner their extract relationships excellent leverage an owners them building an opportunity to Limbach maximum in value at helping with

Our maintenance project systems making service, for it engineering, for and optimal our to opportunity centers will data analytics. and allow to identify us design rooted with Utilization of an us our of data much in partner work to indispensable assets those deliver customers them. long-term ability on work,

important our due of revenue XX-XX disciplined of craft in expertise. still We are Hitting to mix solutions approach, in early a the the are confident innings engineering in business. uniquely ahead. shift segment We're been to we 'XX combination and a be just this positioned our lies I you. much on longer want it's working journey. but wish milestone In Charlie and a pleasure will an a him the milestone, Charlie closing, of that with thank it's what best

that, open the operator, please With Q&A.

Rob, comes question line Street proceed. [Operator Thank Brown first live. with Instructions] Our Rob is Capital. Lake your you. from Please

thanks for Hi question. Mike, my taking

question the quarter. on - First first is quarter congrats on the

towards what environment, is the become 'XX? in how is or about of seeing question more terms Are the of environment? service maintenance First and the environment kind you real-time just of is the business, into seeing pronounced of the a demand sense more are playing side demand shift you that demand a out

Good morning, it's from things us. environment, interesting Rob, demand that's one really the a helped

from demand. to the facilities to to vertical of one markets data is things us to tremendous that's, see think that I we the most We centers, really sciences. helped industrial really end life healthcare higher

the think our happens, on I infrastructure focus customers a what lot capital ability really positioned. resources well - that a repairing of us to of equipment helping at our ourselves in key or now And dedicate and looked large really whether on stage depending we to in we small see we from whether they're a position, it's future, as

future And as on think those our focus in I sectors, excited - mission-critical key of So the the from mission-critical is those equipment. that - them from well. environment kind we're demand a

kind margin in quarter. you see the trends those 'XX? How do of continuing then seemed And some the into Okay, of good great. pretty

to XX%. the from We XX%. raise to GCR maintained XX% XX% to to XX% to we've ODR, XX% did So

of And transactional to building we from kind of So a in and we're more lot lot relationship bit point. at a it's into of a a see perspective. go opportunity this the of these just of much early margin with of detail, stages owners, little still kind

think trusted we we're position. where point partnership the to reached we've them of Some in that

we our our there's upon range to we from gave going So ODR customers. to segment, that's but - even how XX% we the think the relationship look we of that with margin XX%, evolve beyond opportunity depend

able to we is those to XX%, margin XX% a more it's to I business think On projects. the lot owner-direct, that we're of being from that shifts to raise on XX% GCR things, the GCR the to reasons less as were - XX% one side of dependent

margin able extremely we're lot And that. selective can higher to demand be we a because with

the that direct. best a higher to we really towards owner So automatically local return and us looking ensuring the get on making our credit driving operators. of segment I give teams. lot And our on - They're return that's at

or that the happening So years. it's is naturally, two kind - last three over happened of

of and But one that GCR. expansion going same kind that both I for opportunity margin there's the we expect being time, owner-direct think at said, forward. So, with in

you. I'll Okay turn over. thank great, it

Our Please next Hutton. EF from with proceed. question comes Moore Chip

I wishers thanks. new morning, role. Charlie, Mike and congrats first, guess Good the best on

you. Thank

doing any a then - continuation X.X or curious bit been thoughts And see like you've You but on focus on to there? relation but that contemplates biggest on hear focus a of coming about talked to XX% in XX% new as ODR sort I particularly CEO, slide, areas. can M&A, on to to maybe time. you the in area, I'd new execution you over as expand assume getting love your what that Limbach

excited to to Sure. years XX-XX the that set early two in to mark get XXXX. up we're We're we're unable -

Limbach, opportunity So beyond well an strategic that you involve we're - direct mix as to have really From of lot a looking that we perspective, extend a with we're XX-XX mentioned offerings. our GCR. owner compared in from going to

as I is that long-term beyond question, previous of from now, just that starting perspective. in lot but mentioned Right upon it a value the kind value lot there's driving trusted a based of that relationship, of

We've focused really resources. the to been accounts. focused those and - on the getting on really focused on top accounts point our account to dedicating customers So we're resources where assigning top trust We're management us.

we're trusted believe where utility less data more paramount platform, they'll their our customers. off that coming those position, in to going to to provide information as business, allowing be we to from solutions reactive we'll those And - to us ultimately, extend proactive. that's its be analytics a us information whether could be and on data we information give and And able gain relationships, asset more information,

our going decisions. us are customers' spends future understand business help the what be. making make to, are long-term and us their will to the that and both right business customers visibility in That from our the Provide sure

So to - those short, range I expand we're from perspective, to and going XX% the that really continue again, think of margin a on building owner relationships. think XX%. even it's be I And focused set we've to really

to that too, we're making value those customers - it, changing that sure customers, beyond key but about our we're their sure of And also piece the into providing to relationships that and relationship is and business. of a of get lot the make piece a higher and end to providing with to really insights

look that you in of we that X.X referenced. opportunity that So at as Limbach lots really

yes the in many cases, in with - today, multiple we're yet locations, these one we building. that Chip, buildings, multiple customer base on have campus have many, or customers one campuses multiple working

right is on or really on the other can to we customer account focus that all that account that relationship develop more as that say, now with share gaining management, So that core expanding of get management, wallet we buildings. those into focus

a have And relationship. happens the - to you that trusting just us. They introducing naturally other start buildings

one think - the going money our revenue the forward out of So dollars areas the that's existing We selling I that's core customer relationship. to focus spent already those really of base. expand of

expanding matter relationship share. Now it's of and that a gaining more wallet

that assets some investment, organic. That's the up helpful, it's might whether sales ODR did something expect beneficial? new you like mention And a you the more continued might that also investment And then Charlie. should we the organic or you be that, market on could - scoop think of -

shift going more organic we've to of an focus. really perspective, lot management expanding from shifting just type a - to that or business an resources, to account to really that and new sales of Chip, had that's Yes,

this as With customer in relationship. kind money. it's spent of we it's our management new gigantic lot we really, of development, changing think business I less And of about forward. So of a move list. board account We've gathered a type

about mentioned, relevant other growth too make possible of piece is as as changing perspective to from talked the which even us. want is But you our edge piece and really for as is, important relationships, to well. as as that other a we're us cutting sure as The tech a I it acquisitions, we customers from perspective of those to being

script, than in mentioned expected. the we - that deal better So as Jake excited we're the Marshall

kind that out Marshall pipeline. type robust in there's deal. to a in or of say, a six tuck-in have eight pipeline, type lessons that coming we've months lot more company. the we build And we've worked really ODR last styles Jake robust of two acquisitions, And of seen centric learned of the different one I'd And are

So companies perspective. as of is, us range other that of then there's in geography a helped well. piece bunch the that's it And new from

Can you now. we're where not get us places right to

is there. really of Mississippi. Our our gaps have of we And you geography, lots focus if the look right east at

think of the lot again, Marshall, is Jake pipeline extremely There's acquisitions. - So to point And opportunity within I gone well. it's back I a robust. if the

that kind the about Marshall is that of forward staff apply take principles we've we're as learned the learned as of and acquisitions into we've to really we together. we lot all make Jake that, A move credit But going too. to some of at to - those new

one just on Thank we guide, the in And half saw And more you. of maybe I of sort on second terms about the then split what the to last one a similar we waiting XX-XX ODR/GCR. any confirm that. in think XXXX should I it's to kind Fantastic. year assume revenues? want of for around

normal again, just a we've which a as of years, kind kind of do you is it's from what to normal business, ourselves end is now projecting had a a want But back perspective, the a that it. XXXX. well. of the front to our the to we And end right as stronger and kind for natural there's of bit last is than of add split think we're that? XX-XX couple over Sure. to little cadence cadence seasonality Jayme,

a as as in XX-XX should it little that you'll be obviously, the higher, of a just about yes cadence SG&A see well on a script, - it back the we percentage bit as stronger but no, based same Yes, relatively mentioned half. of as to, thinking targeting that we're revenue

I'll thanks. all hop right. Jayme. Thanks, everybody. back in queue, Thanks, Perfect,

Chip. Thanks

follow-up we moment At time, please. call like will this One turn At comments. to have the back a I Instructions] I this - time, for would do over management question. closing to [Operator

everybody, you, in like strategy. interest We your innings we there's, and Limbach. We're early feel about continued Thank go forward in of well, as the a opportunities we're of the it, for lot too. really as excited

of to company execution 'XX their like everybody I'd to and successful So thank looking for and in forward the employees interest for the all 'XX.

if questions, reach the you IR So have any please our all best. and firm out to

This teleconference. concludes today's

You day. have and may your participation, you for great time disconnect lines this a at thank your and