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Limbach Holdings, Inc. Reports Third Quarter 2022 Results

Revenue from Owner Direct Relationships (“ODR”) Segment up 52.2% Year-over-Year

ODR Segment Accounted for Approximately 48.8% of Revenue and 61.2% of Consolidated Gross Profit

Consolidated Gross Margin Increased to 20.3%

Company Tightens Revenue Guidance and Increases Adjusted EBITDA Guidance

Conference Call Scheduled for 9:00 am ET on November 10, 2022

Limbach Holdings, Inc. (Nasdaq: LMB) today announced its financial results for the quarter ended September 30, 2022. The Company reported consolidated revenue of $122.4 million, compared with $129.2 million during the third quarter of 2021. ODR segment revenue accounted for 48.8% of consolidated revenue in the third quarter of 2022, up from 30.4% in the comparable period, and increased 52.2% over the third quarter of 2021, while contributing approximately 61.2% of consolidated gross profit. GCR segment revenue of $62.7 million was down $27.3 million, or 30.3% as the Company continues to focus on its risk management strategy and improved gross profit. Consolidated gross margin improved to 20.3% from 18.9% for the third quarter of 2021, and gross profit increased to $24.9 million from $24.5 million. Net income was $3.6 million as compared to $4.0 million in the third quarter of 2021. Adjusted EBITDA was $10.2 million, up 25.7% from $8.1 million in the third quarter of 2021.

Charlie Bacon, Limbach’s President and Chief Executive Officer, said, “We had a solid third quarter as the evolution of our business to an ODR-centric strategy continued at an accelerated pace. The diversity of our business, along with the essential nature of the services we provide, has us well-positioned for the current environment. Building owners continue to prioritize service, maintenance and repairs of existing equipment in mission critical building systems in response to ongoing global supply chain issues. As the supply chain issues ease, and new equipment becomes readily available, we expect to see a demand in replacements of aged out equipment.”

Mr. Bacon continued, “Consolidated gross margin of 20.3% is a record for Limbach and demonstrates our ability to execute at industry-leading levels. Coupling this solid field execution with a sharp focus on billing and working capital management enabled us to deliver strong operating cash flow of $10.8 million during the quarter. This brings our year-to-date operating cash flow to $23 million, allowing us to focus on reducing our debt without negatively impacting our ability to internally fund potential acquisitions.”

Mr. Bacon concluded, “We are on track to achieve our financial guidance for the year, including an upward revision to our Adjusted EBITDA range. Our performance is testament to our solid execution of the strategic plan we put in place in 2019, including effective risk management policies. We look forward to concluding the year with solid momentum on which we can build on our financial performance and cash flow generation in 2023.”

The following are results for the three months ended September 30, 2022 compared to the three months ended September 30, 2021:

  • Consolidated revenue was $122.4 million, a decrease of 5.3% from $129.2 million. ODR segment revenue of $59.7 million increased by $20.5 million, or 52.2%, while GCR segment revenue of $62.7 million was down $27.3 million, or 30.3%. The Company continued its strategic focus on expanding the ODR segment’s contribution to the business and improving GCR project execution and profitability by pursuing GCR opportunities that were smaller in size, shorter in duration, and where the Company can leverage its captive design and engineering services.
  • Gross margin increased to 20.3%, up from 18.9%. On a dollar basis, total gross profit was $24.9 million, compared to $24.5 million. GCR gross profit decreased $3.1 million, or 24.4%, largely reflecting lower revenue at a higher margin. GCR gross margin improved to 15.4% from 14.2%. ODR gross profit increased $3.5 million, or 29.9%, due to an increase in revenue, despite a lower margin of 25.5%, versus 29.8%, driven by project mix and timing in the third quarter of 2021.
  • Selling, general and administrative expenses increased by approximately $0.4 million, to $18.7 million, compared to $18.3 million. This increase included costs incurred by the newly acquired Jake Marshall entities, partially offset by a decrease in payroll and rent related expenses. As a percent of revenue, selling, general and administrative expenses were 15.3%, up from 14.2% in the second quarter of 2021.
  • Interest expense, net, increased by approximately $0.1 million, to $0.5 million, compared to $0.4 million. The increase was driven by increased interest rates on the Company's variable rate debt. During the third quarter of 2022, the Company entered into an interest rate swap contract to hedge its exposure to interest rate risk on a portion of its variable rate borrowings under its term loan facility. The Company recorded a $0.3 million gain on the change in fair value of its interest rate swap during the period.
  • Net income for the third quarter of 2022 was $3.6 million as compared to $4.0 million in the third quarter of 2021. Diluted income per share was $0.34 as compared to $0.38. Both net income and diluted earnings per share were impacted by certain restructuring charges and other costs that are not included in the prior periods as outlined in the Reconciliation of Net Income to Adjusted EBITDA table.
  • Adjusted EBITDA was $10.2 million for the third quarter of 2022 as compared to $8.1 million for the same period of 2021, an increase of 25.7%. Adjusted EBITDA for the three and nine-month periods ended September 30, 2022 include adjustments for certain restructuring and other costs that are not included in the prior periods.
  • Net cash provided by operating activities was $10.4 million for the third quarter of 2022 as compared to $7.8 million for the same period of 2021. The increase in operating cash flows was primarily attributable to an increase in our overbilled position as of September 30, 2022 and timing of payments.

Balance Sheet and Backlog

At September 30, 2022, we had cash and cash equivalents of $28.5 million. We had current assets of $209.3 million and current liabilities of $146.0 million at September 30, 2022, representing a current ratio of 1.43x compared to 1.49x at December 31, 2021. Working capital was $63.3 million at September 30, 2022, an increase of $0.1 million from December 31, 2021. At September 30, 2022, we had no borrowings against our revolving credit facility and $3.3 million for standby letters of credit, and carried a term loan balance of $23.3 million. During the quarter, we made $2.4 million of required principal payments on our term loan which reduced our outstanding balance.

Total backlog at September 30, 2022 was $457.3 million as compared to $435.2 million as of December 31, 2021. At September 30, 2022, GCR and ODR segment backlog accounted for $332.8 million and $124.5 million of that consolidated total, respectively. At December 31, 2021, GCR and ODR segment backlog accounted for $337.2 million and $98.0 million of that consolidated total, respectively.

Common Stock Repurchase Program

As previously announced on September 30, 2022, the Company authorized a share repurchase program in an effort to return value to its stockholders. Under this program, the Company is authorized to repurchase up to $2.0 million of its outstanding common stock. The share repurchase authority is valid for one-year through September 29, 2023.

2022 Guidance

We tightened revenue guidance and increased Adjusted EBITDA guidance for FY 2022 as follows:

 

Current

 

Previous

Revenue

$510 million - $530 million

 

$510 million - $540 million

Adjusted EBITDA

$27 million - $30 million

 

$25 million - $29 million

With respect to projected 2022 Adjusted EBITDA, a quantitative reconciliation is not available without unreasonable effort due to the high variability, complexity and low visibility with respect to taxes and other items, which are excluded from Adjusted EBITDA. We expect the variability of this item to have a potentially unpredictable, and potentially significant, impact on future GAAP financial results.

Conference Call Details

Date:

Thursday, November 10, 2022

Time:

9:00 a.m. Eastern Time

Participant Dial-In Numbers:

Domestic callers:

(877) 407-6176

International callers:

(201) 689-8451

Access by Webcast

The call will also be simultaneously webcast over the Internet via the “Investor Relations” section of Limbach’s website at www.limbachinc.com or by clicking on the conference call link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=FfcRgx4q. An audio replay of the call will be archived on Limbach’s website for 365 days.

About Limbach

Limbach is an integrated building systems solutions firm whose expertise is in the design, modular prefabrication, installation, management and maintenance of heating, ventilation, air-conditioning (“HVAC”), mechanical, electrical, plumbing and controls systems. Our market sectors primarily include the following: healthcare, life sciences, data centers, industrial and light manufacturing, entertainment, education and government. With 16 offices throughout the United States and Limbach's full life-cycle capabilities, from concept design and engineering through system commissioning and recurring 24/7 service and maintenance, Limbach is positioned as a value-added and essential partner for building owners, construction managers, general contractors and energy service companies.

Forward-Looking Statements

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 impact of the COVID-19 pandemic on the construction industry in 2022 and future periods, timing of the recognition of backlog as revenue, the potential for recovery of cost overruns, and the ability of Limbach to successfully remedy the issues that have led to write-downs in various business units. 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. Some of these risks and uncertainties may in the future be amplified by the COVID-19 outbreak and there may be additional risks that we consider immaterial or which are unknown. 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.

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Operations (Unaudited)

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

(in thousands, except share and per share data)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenue

 

$

122,357

 

 

$

129,177

 

 

$

353,299

 

 

$

363,540

 

Cost of revenue

 

 

97,503

 

 

 

104,714

 

 

 

288,785

 

 

 

303,158

 

Gross profit

 

 

24,854

 

 

 

24,463

 

 

 

64,514

 

 

 

60,382

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

18,688

 

 

 

18,302

 

 

 

56,113

 

 

 

52,679

 

Change in fair value of contingent consideration

 

 

386

 

 

 

 

 

 

1,151

 

 

 

 

Amortization of intangibles

 

 

386

 

 

 

87

 

 

 

1,184

 

 

 

295

 

Total operating expenses

 

 

19,460

 

 

 

18,389

 

 

 

58,448

 

 

 

52,974

 

Operating income

 

 

5,394

 

 

 

6,074

 

 

 

6,066

 

 

 

7,408

 

Other (expenses) income:

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(547

)

 

 

(424

)

 

 

(1,511

)

 

 

(2,140

)

Gain (loss) on disposition of property and equipment

 

 

150

 

 

 

(49

)

 

 

262

 

 

 

(41

)

Loss on early termination of operating lease

 

 

 

 

 

 

 

 

(849

)

 

 

 

Loss on early debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

(1,961

)

Gain on change in fair value of interest rate swap

 

 

298

 

 

 

 

 

 

298

 

 

 

 

Gain on change in fair value of warrant liability

 

 

 

 

 

 

 

 

 

 

 

14

 

Total other expenses

 

 

(99

)

 

 

(473

)

 

 

(1,800

)

 

 

(4,128

)

Income before income taxes

 

 

5,295

 

 

 

5,601

 

 

 

4,266

 

 

 

3,280

 

Income tax provision

 

 

1,654

 

 

 

1,615

 

 

 

1,275

 

 

 

844

 

Net income

 

$

3,641

 

 

$

3,986

 

 

$

2,991

 

 

$

2,436

 

 

 

 

 

 

 

 

 

 

Earnings Per Share (“EPS”)

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.35

 

 

$

0.39

 

 

$

0.29

 

 

$

0.25

 

Diluted

 

$

0.34

 

 

$

0.38

 

 

$

0.28

 

 

$

0.24

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

10,444,987

 

 

 

10,266,486

 

 

 

10,429,671

 

 

 

9,915,966

 

Diluted

 

 

10,690,434

 

 

 

10,491,863

 

 

 

10,595,061

 

 

 

10,145,470

 

LIMBACH HOLDINGS, INC.

Condensed Consolidated Balance Sheets (Unaudited)

 

(in thousands, except share and per share data)

September 30, 2022

 

December 31, 2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

28,419

 

$

14,476

Restricted cash

 

113

 

 

113

Accounts receivable (net of allowance for doubtful accounts of $349 and

$263 as of September 30, 2022 and December 31, 2021, respectively)

 

110,998

 

 

89,327

Contract assets

 

65,266

 

 

83,863

Income tax receivable

 

214

 

 

114

Other current assets

 

4,318

 

 

5,013

Total current assets

 

209,328

 

 

192,906

 

 

 

 

Property and equipment, net

 

19,131

 

 

21,621

Intangible assets, net

 

15,723

 

 

16,907

Goodwill

 

11,370

 

 

11,370

Operating lease right-of-use assets

 

19,272

 

 

20,119

Deferred tax asset

 

5,407

 

 

4,330

Other assets

 

516

 

 

259

Total assets

$

280,747

 

$

267,512

 

 

 

 

LIABILITIES

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

9,719

 

$

9,879

Current operating lease liabilities

 

3,602

 

 

4,366

Accounts payable, including retainage

 

63,787

 

 

63,840

Contract liabilities

 

42,522

 

 

26,712

Accrued income taxes

 

2,264

 

 

501

Accrued expenses and other current liabilities

 

24,140

 

 

24,444

Total current liabilities

 

146,034

 

 

129,742

Long-term debt

 

23,473

 

 

29,816

Long-term operating lease liabilities

 

16,532

 

 

16,576

Other long-term liabilities

 

1,838

 

 

3,540

Total liabilities

 

187,877

 

 

179,674

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

Common stock, $0.0001 par value; 100,000,000 shares authorized,

10,447,660 issued and outstanding as of September 30, 2022 and 10,304,242 at December 31, 2021

 

1

 

 

1

Additional paid-in capital

 

87,045

 

 

85,004

Retained Earnings

 

5,824

 

 

2,833

Total stockholders’ equity

 

92,870

 

 

87,838

Total liabilities and stockholders’ equity

$

280,747

 

$

267,512

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

Nine Months Ended

September 30,

(in thousands)

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

Net income

$

2,991

 

 

$

2,436

 

Adjustments to reconcile net income to cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

 

6,173

 

 

 

4,353

 

Provision for doubtful accounts

 

235

 

 

 

126

 

Stock-based compensation expense

 

1,980

 

 

 

2,016

 

Noncash operating lease expense

 

3,336

 

 

 

3,152

 

Amortization of debt issuance costs

 

100

 

 

 

251

 

Deferred income tax provision

 

(1,077

)

 

 

391

 

(Gain) loss on sale of property and equipment

 

(262

)

 

 

41

 

Loss on early termination of operating lease

 

849

 

 

 

 

Loss on change in fair value of contingent consideration

 

1,151

 

 

 

 

Loss on early debt extinguishment

 

 

 

 

1,961

 

Gain on change in fair value of interest rate swap

 

(298

)

 

 

 

Gain on change in fair value of warrant liability

 

 

 

 

(14

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(21,906

)

 

 

(12,678

)

Contract assets

 

18,597

 

 

 

(5,095

)

Other current assets

 

698

 

 

 

(1,243

)

Accounts payable, including retainage

 

(53

)

 

 

4,131

 

Prepaid income taxes

 

(101

)

 

 

(217

)

Accrued taxes payable

 

1,763

 

 

 

(1,426

)

Contract liabilities

 

15,810

 

 

 

(9,645

)

Operating lease liabilities

 

(3,264

)

 

 

(3,036

)

Accrued expenses and other current liabilities

 

(3,612

)

 

 

(2,173

)

Other long-term liabilities

 

(130

)

 

 

(112

)

Net cash provided by (used in) operating activities

 

22,980

 

 

 

(16,781

)

Cash flows from investing activities:

 

 

 

Proceeds from sale of property and equipment

 

442

 

 

 

421

 

Purchase of property and equipment

 

(725

)

 

 

(687

)

Net cash used in investing activities

 

(283

)

 

 

(268

)

Cash flows from financing activities:

 

 

 

Proceeds from Wintrust Term Loan

 

 

 

 

30,000

 

Payments on Wintrust and A&R Wintrust Term Loans

 

(11,571

)

 

 

(3,500

)

Proceeds from A&R Wintrust Revolving Loan

 

15,194

 

 

 

 

Payments on A&R Wintrust Revolving Loan

 

(15,194

)

 

 

 

Payments on 2019 Refinancing Term Loan

 

 

 

 

(39,000

)

Proceeds from financing transaction

 

5,400

 

 

 

 

Payments on financing liability

 

(7

)

 

 

 

Prepayment penalty and other costs associated with early debt extinguishment

 

 

 

 

(1,376

)

Proceeds from the sale of common stock

 

 

 

 

22,773

 

Proceeds from the exercise of warrants

 

 

 

 

1,989

 

Payments on finance leases

 

(2,051

)

 

 

(1,966

)

Payments of debt issuance costs

 

(427

)

 

 

(593

)

Taxes paid related to net-share settlement of equity awards

 

(363

)

 

 

(401

)

Proceeds from contributions to Employee Stock Purchase Plan

 

265

 

 

 

278

 

Net cash (used in) provided by financing activities

 

(8,754

)

 

 

8,204

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

13,943

 

 

 

(8,845

)

Cash, cash equivalents and restricted cash, beginning of period

 

14,589

 

 

 

42,260

 

Cash, cash equivalents and restricted cash, end of period

$

28,532

 

 

$

33,415

 

Supplemental disclosures of cash flow information

 

 

 

Noncash investing and financing transactions:

 

 

 

Right of use assets obtained in exchange for new operating lease liabilities

$

 

 

$

156

 

Right of use assets obtained in exchange for new finance lease liabilities

 

2,171

 

 

 

846

 

Right of use assets disposed or adjusted modifying operating lease liabilities

 

2,396

 

 

 

47

 

Right of use assets disposed or adjusted modifying finance lease liabilities

 

(77

)

 

 

 

Interest paid

 

1,425

 

 

 

2,138

 

Cash paid for income taxes

$

768

 

 

$

2,096

 

LIMBACH HOLDINGS, INC.

Condensed Consolidated Segment Operating Results (Unaudited)

 

 

Three Months Ended

September 30,

 

Increase/(Decrease)

(in thousands, except for percentages)

2022

 

2021

 

$

 

%

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

GCR

$

62,653

 

51.2

%

 

$

89,950

 

69.6

%

 

$

(27,297

)

 

(30.3

)%

ODR

 

59,704

 

48.8

%

 

 

39,227

 

30.4

%

 

 

20,477

 

 

52.2

 %

Total revenue

 

122,357

 

100.0

%

 

 

129,177

 

100.0

%

 

 

(6,820

)

 

(5.3

)%

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

GCR(1)

 

9,648

 

15.4

%

 

 

12,754

 

14.2

%

 

 

(3,106

)

 

(24.4

)%

ODR(2)

 

15,206

 

25.5

%

 

 

11,709

 

29.8

%

 

 

3,497

 

 

29.9

 %

Total gross profit

 

24,854

 

20.3

%

 

 

24,463

 

18.9

%

 

 

391

 

 

1.6

 %

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative:

 

 

 

 

 

 

 

 

 

 

 

GCR(1)

 

8,496

 

13.6

%

 

 

9,586

 

10.7

%

 

 

(1,090

)

 

(11.4

)%

ODR(2)

 

9,386

 

15.7

%

 

 

8,013

 

20.4

%

 

 

1,373

 

 

17.1

 %

Corporate

 

806

 

0.7

%

 

 

703

 

0.5

%

 

 

103

 

 

14.7

 %

Total selling, general and administrative

 

18,688

 

15.3

%

 

 

18,302

 

14.2

%

 

 

386

 

 

2.1

 %

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of contingent consideration (Corporate)

 

386

 

0.3

%

 

 

 

%

 

 

386

 

 

100.0

 %

Amortization of intangibles (Corporate)

 

386

 

0.3

%

 

 

87

 

0.1

%

 

 

299

 

 

343.7

 %

Total operating income

$

5,394

 

4.4

%

 

$

6,074

 

4.7

%

 

$

(680

)

 

(11.2

)%

(1) As a percentage of GCR revenue.

(2) As a percentage of ODR revenue.

LIMBACH HOLDINGS, INC.

Condensed Consolidated Segment Operating Results (Unaudited)

 

 

Nine Months Ended

September 30,

 

Increase/(Decrease)

(in thousands, except for percentages)

2022

 

2021

 

$

 

%

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

GCR

$

200,921

 

56.9

%

 

$

262,304

 

72.2

%

 

$

(61,383

)

 

(23.4

)%

ODR

 

152,378

 

43.1

%

 

 

101,236

 

27.8

%

 

 

51,142

 

 

50.5

 %

Total revenue

 

353,299

 

100.0

%

 

 

363,540

 

100.0

%

 

 

(10,241

)

 

(2.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

GCR(1)

 

26,700

 

13.3

%

 

 

31,034

 

11.8

%

 

 

(4,334

)

 

(14.0

)%

ODR(2)

 

37,814

 

24.8

%

 

 

29,348

 

29.0

%

 

 

8,466

 

 

28.8

 %

Total gross profit

 

64,514

 

18.3

%

 

 

60,382

 

16.6

%

 

 

4,132

 

 

6.8

 %

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative:

 

 

 

 

 

 

 

 

 

 

 

GCR(1)

 

25,042

 

12.5

%

 

 

27,770

 

10.6

%

 

 

(2,728

)

 

(9.8

)%

ODR(2)

 

29,091

 

19.1

%

 

 

22,893

 

22.6

%

 

 

6,198

 

 

27.1

 %

Corporate

 

1,980

 

0.6

%

 

 

2,016

 

0.6

%

 

 

(36

)

 

(1.8

)%

Total selling, general and administrative

 

56,113

 

15.9

%

 

 

52,679

 

14.5

%

 

 

3,434

 

 

6.5

 %

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of contingent consideration (Corporate)

 

1,151

 

0.3

%

 

 

 

%

 

 

1,151

 

 

100.0

 %

Amortization of intangibles (Corporate)

 

1,184

 

0.3

%

 

 

295

 

0.1

%

 

 

889

 

 

301.4

 %

Total operating income

$

6,066

 

1.7

%

 

$

7,408

 

2.0

%

 

$

(1,342

)

 

(18.1

)%

(1) As a percentage of GCR revenue.

(2) As a percentage of ODR revenue.

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 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 operations 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 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 net income to Adjusted EBITDA, the most comparable GAAP measure, is provided below.

We refer to our estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue we have recognized under such contracts, as “backlog.” Backlog includes unexercised contract options.

Reconciliation of Net Income to Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

(in thousands)

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

 

Net income

$

3,641

 

 

$

3,986

 

$

2,991

 

 

$

2,436

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

Depreciation and amortization

 

2,025

 

 

 

1,389

 

 

6,173

 

 

 

4,353

 

Interest expense, net

 

547

 

 

 

424

 

 

1,511

 

 

 

2,140

 

Non-cash stock-based compensation expense

 

806

 

 

 

703

 

 

1,980

 

 

 

2,016

 

Loss on early debt extinguishment

 

 

 

 

 

 

 

 

 

1,961

 

Change in fair value of interest rate swap

 

(298

)

 

 

 

 

(298

)

 

 

 

Change in fair value of warrants

 

 

 

 

 

 

 

 

 

(14

)

Loss on early termination of operating lease

 

 

 

 

 

 

849

 

 

 

 

Income tax provision

 

1,654

 

 

 

1,615

 

 

1,275

 

 

 

844

 

Acquisition and other transaction costs

 

45

 

 

 

 

 

243

 

 

 

 

Change in fair value of contingent consideration

 

386

 

 

 

 

 

1,151

 

 

 

 

Restructuring costs(1)

 

1,398

 

 

 

 

 

4,324

 

 

 

 

Adjusted EBITDA

$

10,204

 

 

$

8,117

 

$

20,199

 

 

$

13,736

 

(1) Includes restructuring charges within our Southern California and Eastern Pennsylvania branches as well as other cost savings initiatives throughout the company.

Contacts

Investor Relations

The Equity Group, Inc.

Jeremy Hellman, CFA

Vice President

(212) 836-9626 / jhellman@equityny.com

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