Limbach(US:LMB)2019-11-15 20:18Financial Data and Key Metrics Changes - Consolidated revenue increased by 9.4% year-over-year, with the service segment growing by 15.7% compared to the previous year's third quarter [6][25] - Adjusted EBITDA improved significantly from $2.1 million in 2018 to $11 million in 2019, while net loss showed a $2.4 million improvement [40] - The company updated its revenue guidance for the year to a range of $550 million to $570 million, down from the previous estimate of $560 million, and reduced adjusted EBITDA guidance to $14 million to $18 million from $22.5 million [48][49] Business Line Data and Key Metrics Changes - Construction revenue for Q3 was $118.1 million, up $7.9 million from last year, with year-to-date construction revenue up 2.4% [31] - The service segment accounted for 40.4% of gross profit in the quarter, significantly higher than its revenue contribution, indicating strong performance [27][35] - Service segment revenue increased by 15.7% in Q3 and 15.4% year-to-date, with gross margin improving by over 200 basis points [35][19] Market Data and Key Metrics Changes - Non-residential construction demand remains strong in key verticals such as healthcare, higher education, and entertainment [23] - The company is exploring opportunities in the emerging sector of indoor farming, which requires significant mechanical and electrical services [24] Company Strategy and Development Direction - The company is focusing on increasing margins by being selective in project selection and leveraging existing talent [13][18] - A shift in resources towards the service segment is expected, which is less labor-intensive and has higher margins [18][78] - The company aims to achieve a revenue mix of 30% service and 70% construction by 2021 [38] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over recent write-downs but remains optimistic about the overall business strength and market conditions [49][50] - The focus for 2020 includes strong growth in the service segment and modest growth in construction, with an emphasis on bottom-line returns [51] - Management is actively reviewing cost structures to identify potential reductions in response to increased financing costs [51] Other Important Information - A management change was announced, with Mike McCann becoming the standalone COO, expected to enhance operational improvements [28][29] - The company experienced a shift from a net overbilling to a net underbilling situation, which could provide opportunities for cash conversion [41][45] Q&A Session Summary Question: What are the key items the new management team wants to address? - The focus will be on cash flow and efficiencies throughout the business [59] Question: Can you clarify the recent write-downs and their causes? - The write-downs were related to project delays and impacts not caused by the company, identified during the monthly project review process [62][63] Question: How is the company addressing the labor shortage in the industry? - The company is focusing on leveraging existing talent and being selective about project teams assigned by general contractors [66][78] Question: What is the new interest rate on the debt after the waiver and amendment? - The new rate is LIBOR Plus 11%, approximately 13% [68] Question: How does the company justify the reversal of incentive compensation? - The reversal reflects performance metrics based on minimum EBITDA levels and is adjusted quarterly [93] Question: What is the outlook for SG&A expenses moving forward? - Management is actively looking for efficiencies to reduce SG&A expenses [104]