LMB - Earnings call transcript Q2 2019

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Operator

Greetings! And welcome to the Limbach Holdings Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded.

pleasure Group. your my with Jeremy now Equity The is to host, introduce Hellman It ahead, go Please Jeremy.

Jeremy Hellman

XXXX and very on everyone. company to issued its accompany Yesterday, you will Limbach quarter Thank much a Holdings the and also be announcement slide XX-Q. its Form filed good using morning second The results presentation of this section company Web disclosure company www.limbachinc.com. The X of encourages forward-looking The to Slide site can the found be presentation. presentation call. the the earnings in Investors review everyone the of at statement

to that, I'd go the With Charlie to Bacon, Charlie. of like Please turn Holdings. call over Limbach CEO ahead,

Charlie Bacon

all you, Good Thank for joining and morning us. to Jeremy. thanks

is Joining Jordan. Financial our John Officer, Chief me today

page As our Jeremy mentioned, be a we'll the referencing we're commentary. using presentation note in We’ll deck.

Slide with begin X. We’ll

company noted thing a remains continues benefit and from our key we’ve of previously, to the operations diversity As that quarter. for this the

we contract where our be revenue in Angeles half the the further. solid Eastern PA, office new and this and of appears market healthcare several in experienced accelerating in Los our construction year, Southeast new regions, Tampa, growth Ohio, Florida During of activity Orlando, first to particularly award

imbalance the region, new attractive planned due down was in the globally. we believe booked reductions which margins supply Mid-Atlantic for primarily demand hospital favorable revenue during While and we quarter quarter at the to four projects the reflect

in our institution campus. the hospital Several see projects a large general It’s with a region. is large preconstruction Ohio those business that to of hospital ago for repeat great One same another contractor. we work years that on very and completed very

LEDs managing on of differentiator engineering through we through complex strong continues we are large or and that as have support them the believe demonstrated we call preconstruction very LEDs capable a to Engineering the it. Services, us. that be of for budgets Design We and Limbach phase projects to

be value booked The once period in hospital contract base we for Our this the a agree will preconstruction construction backlog includes actual large upon later project. fee the value.

our in XXXX, which driven was Growth trades in region by the expansion New being plumbing offered into market. services was part from strategic previously our missing in that England in

more key portfolio share us allowed share received and capture greater in well has spend. that market Our been and our customers expansive by services greater projects to of of market

In Philadelphia, we healthcare-related full services. offering secured another and design project construction

the Looking quite quarter in not line anticipated revenue compared for declined last as the region. in offset forward enough to construction, to year. in X.X% revenue decline several regions to growth Top Mid-Atlantic the was

this. emphasize to want I However,

in turnaround track. Mid-Atlantic remains Our plan on

June for projects legacy management values. during carrying through of performing In and quarter resolving expectations at represented legacy of current continues modest that the values that write-up XX, fact, management’s consecutive from projects a and closed out generated quarter ahead profit. operations the a second Progress several

You projects may proven major we available region Mid-Atlantic our the with backlog to in also Limbach curtailed talent. recall our line bring selling in craft

project the announce pleased are We base Mid-Atlantic during major by to received region. customer quarter our we’ve This our sales. was resumed in the well that

our improve we booming work. our by driven pursue against which DC available see delays to forecasted craft and region margins backlog terrific high-quality extreme project the that in our promised labor and Since dramatically our forecast Washington and was talent. opportunities market is tied we to projects setback The labor XX-month conditions, Mid-Atlantic and only craft instituted upcoming

To occur formal the budgeting preconstruction will engineering remind various backlog period. bookings and degrees and promised of work a to future in everyone, in is

labor being craft our project management remaining available to growth availability with We’re of the tied disciplined talent. and around

better spending our and more In have by that our also create we our our to favor, curves efficiency gross in information increased our note to automate and certain with where we indicators supply/demand markets processes. margins increasing coverage profit leading programmers and should estimates. our lagging have we the strong into MIS in contingencies backlog I hiring are more are

construction, work on to our opportunities Concerning dependency field processes part to the our our with to advance assigned all growth modular Limbach team enter our reduce construction prefabrication. plans continues manufacturing of labor addressing work services. This and in to is continue our increase

just service historic growth perform resources extremely and company’s continues and for We of well consolidated expansion seasonally senior margin stronger gross gross over The summer management, both and segment the in the in the division to quarter, new revenue months. service our to response investments sales profit. contributed XX% experienced

six SG&A grew gross and profit XX.X% by to with by period XXXX first service the months, For XX.X%. growing in XX% growing compared the same

gross the drove year-over-year. gross during declined an million, X.X revenue quarter, profit margins increase expanding consolidated Although up XX.X% growth and of

expected line We the top in execution our improving track in are growing investing to and margins our are sales field still segment. growth, while deliver rapidly we service on

business XX.X% months We of six our mix XX% construction. service the XX% the track For remain reach revenue. overall of of a mid-term goal service year, of was to and achieving on

predictive last in California. software England and to into addition looking analytics and business. continuing business and and Southern menu regions sales an offer aggressive to plumbing grow of look we’re we’re of for we specifically, our year, Also capabilities customers. incorporate technologies to service the segments our In certain to New service construction added to ways diversify such our adding energy two within by our effort, our We as monitoring

area. too the far I doing at is in want point stages number testing ahead a beta systems this those evaluating get this early of to small myself locations. here as What only of we’re select in of don’t we’re

support buildings well We our facility to systems or John is a having out segments being front in us both offering control these the assist We and achieved. as as expansion. very discussing detail of Rose potentially similar competition our be progress have be systems will will installed predictive believe allow the analytics in service in more Steady into certain at scalable shortly. USC. Bowl to systems rapid

sales not covers million sales XXXX Booked strong which provides Slide but to XXXX. We’ll plan, backlog and XXXX reflects plus significant totals XXX now X, work activity. now only move which visibility promised on nearly to

at XXXX, we which For point stand we the revenue than this expected in better XX% year. now at coverage is

think about we and big business growth. verticals been and be priority. long-term non-residential diversification industry position business, has well Operating continues for a construction As the overall regional across markets to multiple our

previous As added calls, were the earnings data We phase. delivered phase vertical data significant mentioned a project first award large next that project a the new back in and our awarded of we the successfully of with on in XXXX. large with centers

an changes We constructed newly relationship the with facility deal to Internet technologies. were also in rapid awarded renovate the ongoing to

in sector. We see we expand built huge maintenance this we With for resources to us, potential the resume behind success investing owner-direct have and this construction, a sector a and in services. renovations strong are both

local and business. in we’ve As is construction the noted regional a past,

economic much to are interested the and regional interest local, markets rates markets less opportunities there’s we the see and Right demand we We’re infrastructure end now entertainment than macroeconomic national shortage facility our and more ample and no plentiful of sensitive construction. healthcare where higher is markets consumer pursue that in key of conditions. statistics growth driving in and healthcare, capital centers, data education for and customers

continue Disney business theme we aware, the are expansion with Orlando you parks. continued in enjoy to As

construction started Universal. may about You Universal park read recently a named of recall we new Epic

against Orlando for to and provide Universal’s more will presence. to this to heavy Disney cause region expanding continue our opportunities expect will compete We spend

of revenues volume all decision experienced seeing those year-over-year, either In year-over-year large we of a moderate opportunities difficult our to a projects the a to region plenty in we decline where across comparison general, made completion strategic last are year. or due In of regions faced we markets.

opportunities and promised while years. So growth plenty next headlines our opportunity noise, year. of the acquisitions, at few of along are our work Several ramped regions, with of the numbers Concerning strategic pipeline pursuit all creates our in we some see pursued. over the being in we efforts macroeconomic up we’re earlier of our opportunity for the backlog of looking promising

it hand John our now for to segments in I’ll point, a this of our along with more review financials. John? At detail overall off

John Jordan

on pick morning, Good Charlie. X. up everyone. the review Slide Thanks, I’ll

visibility our top million it Charlie our growth. to reduction revenues growth revenues when As the in XXXX. to and comes XXX.X Mid-Atlantic planned second elsewhere continues XXX.X line to X.X% noted, give million in backlog declined us from massed quarter Overall,

revenues lower the second to quarter additional Mid-Atlantic in of second of compared some that our the million in XXXX. give To were quarter XX.X XXXX context,

from revenues nine regions that, our absent other up So was year-over-year. X.X% X.X or million

margins the to to increased revenues, in million the a quarter. work, in the quarter richer mix to of operations million X.X% our including service despite overcame improved in generally the XXX.X net gross Due Mid-Atlantic, to XX.X% second consolidated basis X.X improved down points the as write and Mid-Atlantic. Year-to-date diversity softness in business execution XXX managed

downs. write offering branch was course. in setbacks We ups to In each expect Southern period few in some our see more quarter, We their a which which in write normal faced ups want projects, write plumbing new XXXX. than write and is including the some on added certainly California downs

While are market with disappointed our our improvement in have we the outcomes, corrected that approach quarters. and we services the to in plumbing coming we expect

change the have orders in open book related process to customer or future and almost and a expect few and Southern a on recovery period. claims to change we of We the amounts are recognition orders Historically, contract projects future pursuing of in California produced cases upside have in margin be are turned in conservative approval with and the the that claims maintained out all periods. our

can’t of environment the second extreme performers. non-senior during quarter which certain in expense, payments for quarter. and recommended of lose management our employees talent, our SG&A the to top market demand retention to We that of respect any compensation in year-over-year, With some we the to increased to make we committee the afford light

SG&A payments. approximately with the being compared incentive of total quarter during accruals was same to XXXX, X.X million The to remaining increase retention compared the was due quarter the increase X.X to the The attributed SG&A year-to-date XXXX. million increased in million June as to X.X in

data in the to The project increase analysis of in controls and remaining better project is mining execution, ensure project us for additional mainly due the gross normal our better increase to cost help future. profits and SG&A staff wages

Mirroring saw I of quarter strength served recalibration X. and offset consolidated revenues, activity impact regarding of second Slide several that solid in growth Mid-Atlantic the levels of regions just comments in made the to the our the region. on now the I’m our

million. Year-to-date, flat essentially XXX.X at segment construction were revenues

the million planned which growth Our offset segment the second due in year. Mid-Atlantic in notably Orlando, XXX.X to is down X.X% by or and were Again, regions, the New Tampa the reduction is to this primarily revenues England. prior quarter other compared

a awarded in on our were the want activity more Orlando region where bit projects I in we three hospital quarter. more to focus the

we I that profiles. and Disney with general work, those disclose Florida solid in backlog has comment including profit gross the don’t the strong have now will jobs healthcare the build relationship pipeline make technical and a by ongoing Although region, the attractive

by biggest that incurring year. The downs Mid-Atlantic year. Construction factor negatively year-over-year recorded segment write last stabilization contributing million margin loss $X.X the was from a which a to was a profit material Construction up last the gross region amount the was to had X.X%, which segment was quarter of adjustment. the the versus net gross from X.X% impacted project margin improvement profitable

from As of a it the so course comes reminder, normal we’re X.X positive when year benefitted of of operations. of quarter write-downs, all first part net the to million, we write-off the which consolidated is for the in still and write-offs

offset million. period regions On the in Eastern revenues nicely at XX.X%. quarter with service prior and up reduced Pennsylvania were X.X% Ohio. segment year XX.X in in segment segment grow led revenues growth and continues our came Mid-Atlantic service as second from activity revenues to levels Slide X, Michigan the by increasing Year-to-date

half revenue activity has expectation year of been especially will the end which of of the producing than quarter regions, that few first supports projects since a Ohio the very our second quick-hitting produce second the in better robust results the Sales half.

sets June was the which pull-through XX, prior we highest for margin revenue normally of XX% our that We up XX.X think approximately of carries base maintenance work do. the was up which million any year. well As from

quarter reminder, emergency the months repair air quarter to to summer a work. tends us As third conditioning be the lead for as often a good very

points basis from margin the gross expanded improved quarter year. to XX benefit pricing XX.X%, segment combination the last Service the continued to Segment XX.X% from of gross and margin volume. second in up

and margin we work. the can a service quarter, the pull-through quarter-to-quarter our projects fourth somewhat quarter to Last rolling average timing simply due of margin introduced gross and vary the variability spot metric as

to As of slightly in the up first XX.X% ticked average quarter, the XX.X% and second quarter. rolling the

June statement of a basis, X, and a items. to Moving to Slide has summarize operating income XX, compared improved we a year-to-date On income of sheet key June X.X of to as XX XXXX. few loss million balance XXX,XXX year-to-date as

a $X.X per as is Year-to-date compares end XXX,XXX earnings XX, loss of share for the improvement are $X.XX of Net improved June $X.XX year-to-date the a year last related share of payments results the of per million profit increased loss related million over income at X.X of favorably XXXX the to improvements XXXX. gross the net amounts. of These to SG&A incentive and to increased quarter. the directly second retention and despite

Our the of million, first at working the XX.X at XX.X XXXX. capital position million quarter from and at up end is the of end million XX.X

current X.XX Our XX. ratio June is of as

and the During control instituted mid quarter and produced These to effective all project link in result regions. controls have better quarter, all generation we with instituted cash positive The being going expect measures cash since closely in results continue new in collections. measures forward. be performance disbursements and to more

remains $XX XX the revolver at the million. term balance at loan on nothing There’s June drawn and

closed credit XX facility, we months not in of the any does in expectation require we’ve new on and have and described making April, any prepayments. Our first previously amortization no which

also the a We which of positive position in XX.X over-billing remain million cash net is positioning. for

SEC As declared a growth. few proper as aware, view and effective ago move acquisition We you last both our by undergoing raise capital the the registration organic was to short-term a shelf for we activities which S-X support weeks long-term S-X are after and review week. filed

call Charlie. Charlie? At the this I’ll to back point, hand

Charlie Bacon

Thanks, John.

Turning X to and thoughts. final Slide some

EBITDA us for for and reaffirming growth. XX.X we Diversification end, be million has up First, which XXX for track us on that focus hit are year. continues diversity revenues primary set financial are of and for million. our as a adjusted To of the for to year operating approximately to goals is guidance well we the continued

want region variable quarter. region that decisions had year business that when the some came payments that I know one really followed Second, it struggled to our The to incurred you we retention at one of in that that on Limbach last impact did of of Those overall. made to return topic time the for weighed and especially business branches, we struggles other we compensation.

growing our in Limbach well. to economy their not that regions jobs was nine them did and we At industry the have had and when very payments. nicely a many outstanding bonus day-in the day-out doing inform go that representing that we employees also our time those admirably struggled, did and well, one Within we other to make branch annual very employees was

Directors places top great and the a hardhat culture team to management proud emphasis Limbach with those day. paramount satisfaction. We our Our be Limbach deal corporate in and have worker the of Board attract to work wearing a of a but come being a safety our industry on concern to also and talent every happiness day-to-day truck, in want folks worker

best participation a have despite annual employee of the our had We finished just of received it is Limbach low the customers. in being paying as conducted numerical bonuses, score our about setback demand and not survey high proud in business survey the years that our booming as great we and as highest known we the for our with care employee We we people the our talent, XX XX% Care the With and are unemployment market survey. at team; industry in

made non-senior level payments move thing past the the to we that right the It company part was managers last employees. that. of right percentage for we our thing we retention employees need small invaluable do. and of Those faced made those to they felt As we lower a by was an know simply the important and do to – year, issues it are

is line the of we are resource our the and Now, and end most team very of have of the the aware Board, At keeping would training our management for company. our that we for in on our the impact the people quarter. growth people day, long-term as the this bottom active also our are investment valuable and and vital quality

year guidance line. both by reaffirming conclude for I’ll our bottom even the are expense, we with this noting that top and added

I conference up at open the to Operator, for questions. this point, like would

Operator

conducting We’ll [Operator you. be a question-and-answer Thank now Instructions]. session.

today Alex Rygiel question FBR. is from first Our Riley B. coming from

line now Your live. is

Alex Rygiel

quarter. John; and Charlie nice morning, very Good you. Thank

Charlie Bacon

Good morning.

Alex Rygiel

sounded what P&L? comes so what little it is backlog “understated.” better Charlie, definitely that we can you going dig by your commitments it to timeline of the be appreciate Could into a further and commitments through those bit you like mean is as your

Charlie Bacon

commented went Sure. since each public, our and we We’ve call promised on figures. always, earnings about probable

working those design a number So haven’t it’s final Once way we already the negotiating roughly have additional book the project build price design right from happens quarter What’s deals. this in we they a we haven’t you mainly that got building about Generally we’re bid comes agreed – project, through Historically, a building management out love the we love in yet, cost in at over project customers going lot a the frankly view What perspective, we’re we’ll and because general certain round they’re bed about it’s professionals budget. thinking have million owner quite we have and We that traditional committed. have preconstruction we’re the of firm out happening the go owners, and now the what’s hire process process if flawed together back particular having that just But but group flawed. and up commitments because process. have it. work one from reengineer happened promised. where and you engineering seen and establish budgeting upon out our bid is for budget go happen for into a have XXX financing of they to it early where and is to find desire are budget fall we’ve with when then – Limbach then the the and get projects. every client they that’s something, that before what something, build that. a owners construction we onboard, But marketplace great create putting and through there now they things they’re number. have the general in a our way construction that that fixed our paperwork of hand, a sometimes the design we engineering and general And professionals we in first they is that hired architects, of bring actually owner, they has to anything But owner reputation it not to a are the budgets budget, contractor designing help of budget. out them. a the our basically for who design, putting of with the we’re famous and customers with and have waking holding is woken up, the contractor an has also Why them and

Design services, of and So owners. and preconstruction or our LEDs managers managers it, we to course our as continue just building impress Limbach Engineering continues impress project to our call and

Bedrock coming us about talk result, a Detroit like early. on said, to building you in up to to owners we’d like and look, As came

to general us, So company. advancing in they fact refer they as, the did but to and told shotgun where continue call Limbach. is we kind what this this marriage, that contractor meaning I get general to and use arranged contractor you I doesn’t hate for that’s to want got procure of the it our And to is it

it well, continue think that going say us our we we’ll call, and grow see probable continue to I I say as each can promised build X. to continuing – reputation. what to So to is worth you’re hear

to to we help a to that how color you does – refer provide bit backlog? more as So understated that refer as

Alex Rygiel

the businesses? years you the mid-single that also Sure, in margin helpful. for on of comment towards digits two that higher the single some is very business single had high it sort past outlook of Obviously in call does; the digit was, Services already range. driving construction’s digits. could longer-term profile it, And

two some to? where you and you could for bracket term, ranges think can segments long margins those So get

Charlie Bacon

down. each one break me Let

the in of that First now where solid the right. a solid regions have supply labor there increasing what a and more where pretty with labor. theory, It’s pricing. particular construction, basic see right all future and And we we’re opportunity we general need we we pipeline, have contractors doing and and see our for backlog demand we’re

just in push we backlog two one here opportunity said look, and reviewed in the case, them, basically we our see we regions we So let’s of and to projects looked their one and envelope. particular at

out. we So Maybe we to increased the that we and basis and the work should points secure rethink our that’s if we that, and through great we’ll XXX see the land won’t flow have by plays margin to may how work but bottom line. that

to it’s XXX the parts opportunity – whether there’s pricing front say number I don’t So opportunity do basis we’re of in in pricing there we our regions. want how construction basis of but been opportunity that see XXX we’ve we points, see us for where publicly, improvement points, a

And side, company. the between actually years a are and look service a our On service – margins in at we’re higher. went we pushing portion transformation of much pretty ago. bit difference service, construction of business you our a slower the Service through when hard was

we actually used the construction. of to in moved construction house, were some our Now the service frankly great people they quite side margins our lower but to over of

those get at that things comes thinking, X%, at number you So price guys service type to we of work. when kind you don’t look, price to it it had basically

see we the improvement a So constant service side. in

the Officers there the constantly why is expansion Our Clearly, now, there’s out margins, much Executive President not? we’re drumbeat right Chief improving like margin. pounded, our responsible margin, and a two let’s working opportunity and number. higher Vice the margin, So that raise for raise the raise who’s Operating being the to so for Service

equipment, future, about to replacement the And being scalable in important separate better as all older analytics forecasting their with be of model. to we their the change-outs, what see to able will about services buildings, is be going we’re starting implement. buildings. us and that is think renovations heard our equipment some a technologies we that’s do capital you customers Predictive in talk on The expenditures us other to and thing help for – of very

it sure working margins. we’re we And that can lift how I that at not Gateway expect several at price Rose buildings us better and called yet, mentioned beta we USC. help Bowl the We’re buildings understand but to test USC the exactly on at to how through our

a it customer think answer better the to of think be are to by line to our will we bottom opportunity because that they data benefit fingertips we So those technologies going and having have an Does their question? there’s employed. the types improve at results help answer or

Alex Rygiel

Very helpful. Thank you.

Charlie Bacon

Thank you.

Operator

Thank you.

coming Our Zane D.A. next Karimi question Davidson. is from from

Your line live. is now

Zane Karimi

Hi. Good morning, gentlemen.

Charlie Bacon

Good morning.

Zane Karimi

backlog little growth the talked far you the with backlog a have you into opportunities, So XXXX bit and about status? current there but how visibility do

Charlie Bacon

fingertips don’t it actually planning we’re I that process at that cover. planning It’s can What off two weeks a process percent entering a terms do. tell ago. now. right we our my you Geez, have that I kicked in We of is three-year

start we Our in any review process, to the I and to presentation, differently add that just plans don’t due for question other figures work respond don’t year. forecasted here? any to for ready yet. done any know have could comment just you of see want Can getting you revenue future or goal September if John, next because haven’t that I coverage color we the are that when our we XX% around Board our further.

John Jordan

with We see just do it we Yes, level. sitting of on to we backlog, XXXX a referring it the yet we into into to coverage does the to. able revenue from give was branches process haven’t really in over basis, existing next that that collected Charlie just the go the so have quantify for coming occur through gotten can four the data. project-by-project be We the that Charlie, we a all will at that’s to burn future. going haven’t in to we burn six your for process weeks, as August XXXX. out us but the middle planning the as The here global haven’t far scheduled that it in coverage considerable point, deep yet But

Charlie Bacon

in about, it’s that us The other just maybe of big, The the will thing [ph] up we project that work we’re hospital given lot work one there’s there, terrific some I’ll 'XX throw talk landed and we in and but engineering, burning that big there we a for but some 'XX. be coverage will backlog promised year nice a cost even final quarter, a 'XX, 'XX that. figure on preconstruction to little from maybe the that that XXXX the that middle a going year, job, into now. 'XX. resolve bit of will and give really It’s huge But to third and very probably excited some into it’s next big coverage really about of us we’re into

we’re to to is visibility 'XX, see So great way which visibility. beyond starting have that

Zane Karimi

and you region Orlando, you but there. the great about about New sounds a a and growth it Yes, can you’re experiencing bit little talked certain And fastest Tampa where then England, in particular you to point growth in Mid-Atlantic ramp the Mid-Atlantic region? how there? the any with is a in the up and activity progression, managing then regards you progressing how are the And seeing slowdown are to in

Charlie Bacon

absolutely about talk amazing Florida. Right there. where what’s down the on just So is with away let’s blown I’m It’s now fastest going happening. just growth

and doing thing what’s waterfront or on he’s of down redeveloped who’s Vinik going being to St. developer I team It’s amazing a $X read week another a just billion redevelop redevelopment that of of Tampa the last Jeff Just area an an in basically is Tampa. Petersburg, whole district. article the presented seeing amazing just just And the there. main we’re hockey the south by regrow business owner

to office that in We the higher get year we a which amazing the you going Florida. And a year any have really XX-foot And an office, up up front really mentioned a as of to the Southeast whole are then opportunities last we Epic Beach finally Southeast this in Beach. touch Florida but education we crazy don’t There’s Boynton condominiums. the do decided area we healthcare, it’s with did foothold And it’s open pole, won’t the there I which got Florida, office Universal. and Palm with Central massive theme all You parks. refer but we to opened Disney West just those spend us. at

area in down for playing market transportation that’s not redevelopment. there, the going airports another with We’re but down are there crazy All the us.

through it. us wanted, but to were would we’re proposed the started we’d and Columbus. kind sector, it’s us handing basically one ago for anything go if we’re just – That had on of that I’ve Columbus, amazing just particular have me I they But that. number seen they let customer what I’m with of in up $X downtown doing about that rebirth for is conversation, go with But that has data Detroit. that. process, It’s center we comment of there Detroit. was already top have one more there there billion. and – me being that They to This other they three work on three you of another clearly that commitments a talking of moment. awarded $X want. weeks It’s over they in like large backup jobs there going compete a simplifying the they And a that the as backlog met there. So never billion amazing. project, When we best-in-class and contractors what’s with I talking I for I and project us actually were and want our customer work market. in in Columbus. on about went viewed told large could them, towers hospital

We and burnt that mission of business of Now, bad now our we’re on XX-month right on with construction house That what last our repeat the management craft is tied growing future. focused all to of labor to year, construction side going talent. our to view in project were Mid-Atlantic is rolling not that. critical availability our we’re said,

all hear frankly us. comments, best-in-class about quite you contractors of while we growth favor, being are very because and and one demand So want very, general curves out there in these margins us, need disciplined great contractors our are supply our are we’re the and lifting we they

of are So actually we’re executive. had – that and that particular But they conversation aware this disciplined. to going with we remain coming

what exactly said. in I Mid-Atlantic, just Now doing we’re

disciplined. extremely remaining We’re

between to there is XXX XXX down previous our my spot. craft So on sweet comments labor

to now that was the We the We’re 'XX heard for actually projects I right a down that. us to at There 'XX. last really few looking and felt I last up good backlog nice month, down into is about that craft which about 'XX gives we’re and spigot. number XXX opened we’re –

disciplined with we’re take doing The going to there are up on. we very leadership impressed down team in very to. what be I’m they’re job. So an that very, what excellent installed we new

the key will it – So is word remain discipline.

color maximize and growth on A but hope longwinded and growth some margin. control Let’s discipline. the markets, provides I that let’s answer

Zane Karimi

getting Okay. about you do last with I you I feel one begin earlier M&A do appreciate it that. if How new may. today? little one, when opportunities? comfortable and And you a mentioned I know

Charlie Bacon

Yes, 'XX, with get to as so we we things we got through at opportunities Katz what warm a through in started we – who’s and continued different to had on in into Acquisitions 'XX. to after charge entered marketplace we But we get back opportunities. aggressive Markets, 'XX through got keep Executive Vice Matt entered plan some 'XX, President our of the he Capital and looking

service couldn’t But the industrial to looking several company, quick-hitting, that’s to last driving I shotgun relationships intrigued industrial looking regions Southeast might plant but that we’re be in bit year owner, certain for to different an interested by unfortunately intrigued have the opportunity which earlier, us We also did right very strategic we closer like. at the we think opportunity and on the closer a the and think gets of and on be industrial a an is we or the at big owner that in closure we’re mentioned other a we get play of out marriage, it a do toehold to having We but and the that here now work type on. heels the companies be that owner and as us with tends direct we’re we’re still with that. – at work with We acquisition. looking strategically those at better

to on are on but hunt. put got anything, in we’ve a I’m some not we So different play. things going definitely timeline the

Zane Karimi

Thank you.

Operator

Thank you.

question Gerry Our ROTH Partners. coming today next from from Sweeney Capital is

now is line live. Your

Gerry Sweeney

are morning, doing? you Good Charlie. How

Charlie Bacon

Good Gerry. morning, Good.

Yourself?

Gerry Sweeney

Thanks. well. doing I’m

demand, of the your bit client it in specifically taking up of half of I’m step that second on that sort a on? year. margin your rest of the the the this for by a touch wanted and pricing we’ve EBITDA side, guidance. sort guidance fair specifically front Just maybe little talked up, at in more look the implies we on et look maintaining year, about a margins How – Taking to going cetera, but view that do and a is

Charlie Bacon

the took you coverage maintaining well. payment when it our all Yes. thing want comfortable did that felt and – Well, QX remarkable want out in pull looking 'XX to first figure, based the to terms second John, just you you and where actually backlog the of last we also the thought was half. again, half, right for have half we our XXXX do Mid-Atlantic dissect with margin, We it regards number misstate are in second a make if but that the year pipeline. year’s look how to things do available? remove Mid-Atlantic hit, was at to we retention company on don’t extremely from of In to and doing and last second a we I guidance of I

John Jordan

As far percentage? gross as the margin

Charlie Bacon

or that. share I Gross know margin can percentage and actual if don’t number we

John Jordan

I’ll do back we can Gerry, circle some research, and that. on

Gerry Sweeney

Okay.

Charlie Bacon

not performing of obviously last to this year, got But we’re a last the and we going what business the but repeat year to a no upside the of expect board we right opportunity coming some upside for there’s last see extremely indication year. we well. have hiccup big to we’ve extremely Across did now the we’re year. well lot did and We that had business in

guidance. with comfortable reconfirmation we’re So of

Gerry Sweeney

Okay, great. I my Thanks. really it. appreciate That’s from it end.

Charlie Bacon

Gerry. Okay,

Operator

Thank Instructions]. you. [Operator

today coming question from is next Our from Capital. Mark Henry Midwood

Your now line live. is

Mark Henry

morning. Good got a Hi. I’ve taking few. questions. Thanks for my

cash starting free Just flow. with

get what leverage year said and free XX million generate cash burned So flow? expected to back XX pay that first you’ll level that XX.X leverage and I confidence the to last in that the of to XX flow the you that between which XX through year this the free if million of you down year generation a debt about on of generate this $XX And on the you trailing year. be you call from half full able to you of under half cash turn Xx half million million implies could guess earnings of gives million end you guys million only of EBITDA. to use the by the for

build the Just half. free the flow in back want understand the through to cash confidence

Charlie Bacon

John. ahead, Go

John Jordan

was the Yes, monitor from will basis regular that cash that free quarter. on to lower first a flow, it a continue be of we range the provided in that towards and end

in are of There are cash will far second to that to how growth several be that flow. year. business I have it’s generation half to cash. the and place. significant revised are produce to positive the additional in produces that continue as we continue some service projects over-billed which reference second made be will The over-billed in As expecting we generated, going cash procedures the policies half

current pay early. don’t that off have we in early. any to With the the some really excess expensive agreement There’s retire the it credit it terms make pretty cash, debt to plans

that growth would flow So push business to be in continue to organic be reinvested business generated any the forward. the free of cash would the

Mark Henry

looking – I at just flow. million low stock implies free then cash at you’re of market cap. $XX you the million said today, look of to guys you so a going be I’m your That have the at end Okay. $XX guidance. And

very significant cash the to So cap. generation of market that’s relative

then give I can three this all took Mid-Atlantic? how of California downs another looks million guess stream comfort projects $X.X start given write of just Okay. the two, the And year in track guys community of on in investment really downs write a Southern number like on construction and which the last that write down we not write downs, the you the is saw thrust your you the like stock, record

Charlie Bacon

– was it in one took Look, hit reason our to with expansion. a California Southern the that do had plumbing we

into got did plumbing which like went we in out So extremely up New we well. England there

light going. period. projects in about pricing, the through when and have, margins We a bit side. share on corrected labor look started we to we nearing lower on bit getting Southern the took and completion, the started done. our books and just since bit aggressive than took the the California, market that they’re we we should that We’ve less was priced probably XXXX some we the a that pain during work back and that they’re get realized into a that We pricing got it plumbing at it

as Terminal, project. done cost project the down delays faced terminal there’s Midfield those the mega We also went project. they’re were were has because a And projects that adjacent That a project LAX. some There It’s the have project extremely to many to delays goes result We’ve called expand impacts we’ve and going some one that. to They of redesigns. well. LAX. had through slow Midfield to they But another it. That project. another out many, Terminal some of done historically is out

we recovery. So It that But a nearing we the project, also claim that a actually completion large wasn’t take had It complete portion for which hit. future terms books. nature. to a for minor to conservative was that, in is in cost of through our of view have in

right that the customer get pricing with with contractor general who’s we’re the So working all now, to that resolved. working end

the to as as out a concerned, So pain LAX so a pretty far put track just the strategies there. work is plumbing, way there. That That’s changed that about of We’ve through hit. of process. is have been pricing out need our books. complete, And positive through been the just corrected. record our took a we bit all work has We recovery the good

Mark Henry

the of you half the last for one cash that guys just to quantify orders guys then into business amount And change expect of Okay. come in from the back dollar me. Can one year? the you

Charlie Bacon

on of to our do it’s you some out a because of it’s John, John, put the I tough that? a control. response table in control, some figure to think that’s of our have

John Jordan

approval out continuing can for control. to order cash business to timing to user. the push bill orders, really customer to convert Mark, were change as in the Yes. some that a of to change out to the we we through a needs us end come have but earlier. on cases also generation big as and them. the change into of are the our the situation in job-by-job far a fair not in the that regions say of amount There It do contribute orders through approval depend about change orders, would we is I that’s only that push go cash that from somewhat is money but there to all speaking

that process We’re right working now. through

So half, But which in gains really to projects which to generation. second But track. for quantify that produce try to indicate that at, cash of to the we don’t quantify gross it that’s what we would they from booked margin were our for statistic. do general we additional look statistic XX% a typically dollars don’t for try that to track

Mark Henry

last me. comment Okay. for one just And

stock is So assuming trading you expect guys generate guys orders back no you assuming that in at for EBITDA. and cash half, the the change cash free flow the Xx

get Xx to public a at we multiple it from to market? multiple How an trading EBITDA. does in to the do What has You’ve Xx got believe do get that peers Xx management Xx multiple? to

Charlie Bacon

a no of doubt because paid we the last we took year price. and hit happened what Look,

we So expect price coming way the see recovery news that to the to got hole. continue it share of the we since out of we I happy trend trend through was that and to

acquisitions, but have we a in our was but nice we company. the the two, activity We clearly a is organic need build some So also in public here A being and play. company. are the do piece to the of are which to strategic, here rollup looking market. we those And we’re continued in of organic of at on certain at them up confidence revenue. we’re think $X not always leverage midterm steady I of growth play looking to a that but expansion billion expect at overheads continued back surgical also I north in do do looking to We want call flow acquisition

to what deal, both to right to on were we acquisition ready as going work we’re And going well continue organic we’re that. when to we’ll But the continue do we the we do front. with announce. So said as

Mark Henry

Okay, great.

John Jordan

just clarify Mark, to thing. one

then change owner assuming collections made generation, from get you’re general the the orders process the no contractor orders through to resolution. billing, needs and normal But that change a asking were cash about with the cash to work that’s and You cash generated change a from you negotiations is orders, [indiscernible] comment process.

no some want second confusing So half in assumed year. The to the cash terms projects change of the of orders. the weren’t I year there. there the definitely we’ve margin big be on second the generated through that will from generation, of couple claims cash no just those clarify we a to half contribution sure in make

Mark Henry

luck. All right, taking great. my you much for Thank good questions so and

Charlie Bacon

Mark. Thank you,

John Jordan

Thank you.

Operator

Thank you.

next Our question coming today is from Hughes Capital. Mike from SGF

Your now live. line is

Michael Hughes

on question. last Just caller’s follow-up a questions few the

quarter revenue percent in was plumbing what of business California? your the So Southern from the in

Charlie Bacon

Oh, figure? have geez. that don’t I John,

John Jordan

total but Mike broken a would have down, We plumbing that small I say -- don’t the of percentage pretty it’s

Michael Hughes

…which X%? is less than

John Jordan

say total of the company’s quarter. the would for I than less X% revenue Yes.

Michael Hughes

Okay.

So plumbing as a downs California were very, Southern material, the write revenue of very percentage correct? in

Charlie Bacon

were. Yes, they

Michael Hughes

changes issues process, you again? I you’ve had behind so Southern And should doesn’t thought from California so this away anything we take is made there Okay. that you, these happen

Charlie Bacon

done. Yes, we’ve what that’s exactly

COO Our in plumbing out quite particular a time has looking spending been bit situation. California just at of that

aggressive apprentices price the put found together refigure we who’s you too for you’re craft what talent good result very that they had of on to very many and some have in and aggressive on in call experience, and out for meaning figuring But a getting got business XXXX, mix of too you been then our mix you a that crew too full the what have there. What were apprentices way. as that makes then blown out they XX come We we it our years, in the and wage higher worker is projects the pricing. crews, price we just kind

as a expensive the have and of that, we sheet there. So we a which terms traits. pricing is and doubt, as as was more nice doing out piping allow we’ve it piping, marketplace a was traits it provides can’t future cheap water of about which is that We opposed going three-trait much plumbing and which forward that growth increased it in plumbing but we now in metal the mechanical out to a bit steady three selling attractive both as what could chilled there such do no excited us two will it we’re on by all package now is our just we’re thought learning curve

happened, a So correction, it have we mistake. it. fixed was the shouldn’t we had pricing but to It do

Michael Hughes

an was And when did realize issue you there? there

Charlie Bacon

their blown A changes. quarter that’s we made of plumbing ago the and and remaining months we a have review couple the when did and in adjustments they of full work during backlog that

Michael Hughes

sale I of stock two Okay. the remaining late guess comment. in I were individuals a just and think your large of Board. May I your on There one have was

recognized look this a of not problem you Given good. just months sale couple my does ago That’s that comment.

Charlie Bacon

it in properly. it we and to company our and homework all Yes, earnings it meaning confirmed that we properly do recorded all normal I have we identified was we timing, process, we do management guess do a to when at you had take all in does has there changes and that been the with with the our had look was was does have, then that’s We adjust we produce oversight do what the our to the reviews an to to for what issue. stringent

Michael Hughes

done improper. street time. is quarter point in it of you in really directors sure the I’m you’ve reported. you. your the expectations. I involved The sale whether questioning materially my good appreciate That’s this only late not not I’m two short look anything does just given stock what quarter May Thank of is and

Operator

session. turn like any closing does I’d to comments. floor That back today’s question-and-answer further or over for you. conclude to management Thank the

Charlie Bacon

I all market. investments everybody to our operational to this I’m and the in I for small with us. some this thank improve and We’ve allow questions our made pleased growth across you. want improvements to XXXX. our business in joining Thank morning appreciate quite margins continue the heated

on craft labor. expansion Continue apply forward of All service our today. take smart of And We enjoying, available this participation Thank to you you your the segment. want rapid our speaking quarter. your tied again with boom interest advantage we growth look our construction with the to third best. for we’re and

Operator

does That today’s conclude you. teleconference. Thank

We may for participation you You thank day. time your at disconnect this line wonderful your a have and today.

Limbach (LMB) 15 Aug 192019 Q2 Earnings call transcript