Q1 2020 Limbach Holdings Inc Earnings Call
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Your host Mr., Jeremy Hellman of the equity group. Thank you Sir you may begin.
Thank you very much and good morning, everyone yesterday afternoon, Limbach Holdings analysis, 2021st quarter results and filed its form. Thank you for the quarter ended March 31st 2020 today. The company will be reviewing those results are providing an update on current market conditions. The company May also referred to a slide presentation accompanying this earnings call.
The presentation can be found any investor section of the company's website at www Dot Limbach <unk> Dot com. The company encourages everyone to review the forward looking statements disclosure on slide two of the presentation with that I'll turn the call over to Charlie Bacon CEO of Limbach Holdings, and Jayme Brooks, the company's Chief Financial Officer.
Welcome everyone and thanks for joining us today, we'll be providing an update on the impact of the clinical virus first quarter results, including an update on liquidity and an overview whatever strategy going forward.
What does shoretel by commenting on the recent restructured leadership team.
Team is working closely with our business units and we're realizing substantial improvements in all of our key metrics.
We have considerably momentum tactical execution, while continuing to developing a deployment of silverlink border strategies, all of which I'll cover later in my remarks.
Well into the details.
We had a solid start to the year or what is typically a week quarter for the company seasonally Jamie and I will discuss that further detail shortly before we do though let me call first comment on current market conditions, which we've summarized graphically on slide four.
Since were speaking with you on base, 13th we've experienced a broad based restart construction activity in those markets, where the virus that impacted our ability to work.
Our most heavily impacted market, what's new England worst substantial portion of our project work isn't Boston proper.
The market had been shut down entirely by the mayors of Boston, Cambridge, but reopened for construction activity last week in May.
Outside of New England, we experienced isolated pockets sub suspend the project activity, depending on the preferences of individual customers.
However, only a limited number of those project shutdowns were meaningful to any local branch and that was largely limited to Orlando, where Disney has taken a more cautious approach.
None of our projects in backlog had been canceled rather the timing of some projects that pushed to the right, which will shift revenue into later periods.
Our Disney Port projects remain suspended at this point.
We recently attended a works actually what the Disney Representatives to discuss restarting those projects and how to deal with virus safety protocols.
We expect project activity to resume before too long. So at this time more or less back to pre cobot state of activity of the construction segment.
In the service segment that activity is also returned to pre corporate levels in the last week or so with a few limited exceptions. For example in Ohio, We held a number of small projects and special projects that are ready to restart on July 1st.
As with construction, we expect these delayed or deferred service projects and maintenance work to be completed although there may be some owners, who push work, it's all fall and winter.
The other related noble point to report on the innovation being driven by increased focus on improving airflow circulation and control wouldn't indoor environments.
A number of groups inside the company are engaged in discussions with customers. All these or other issues led by our design and engineering group.
We're exploring solutions to these challenges in a boring much ranging from office to student facilities to elevator cabs and stairwells.
The viruses served to reinforce what many of US had to come to the take for granted which is the importance of design a proper functioning of the systems that keep a school this summer and warm in the winter.
And that movement of air throughout facilities, which we spend a great deal with metal talk a.
Our business isn't a central business and we're leveraging all of our capabilities to continue to innovate for our customers.
As I noted in our May conference call I'm proud of Limbach organization and all of our employees have accomplished so much since the March as well as they're continuing efforts to manage under these variables still challenging circumstances.
[noise], they're continuing to execute the stay safe get cash and get work priorities, which we implemented in late March and we're making strong progress in many other areas too.
We are grateful that within the Lubbock family incidents are covered by team has been minimal as I stated earlier.
Very few of our employees have been sidelined and non seriously.
So with that let's move on to review, our first quarter performance another real time updates.
Let me first comment on the recasting of our quarterly results for the three months ended March 31st 2018, what's reflected in the current filing as you may recall, we adopted both HFC topic statistics in a pretty cute in the fourth quarter 2018 for the annual and quarterly periods beginning after January one 2018.
Using a modified retrospective transition approach since we filed a 29 <unk> quarterly results before we were required to adopt the junior standards. We are obligated to recast our 2019 quarterly results to probably reflect these genius standard at each quarter and during 2018.
So all the numbers we discussed today for the first quarter of 2019 or as recast for all remaining quarterly filings. The 2020, we will be recasting the comparable 2019 period quarterly results to comply with the two new standards well certainly categorizations in light items, we change in each quarter, there's no impact on full year.
Result, or cash flows previously reported for fiscal 2018.
With that and without comment on our first quarter results.
We had a solid first quarter is that reflective continuing progress in improving field execution cash flow generation and balance sheet management.
The first quarter has historically been our weakest quarter from a seasonality perspective, so achieving net income breakeven is a positive development.
Also certain year over year comparisons appear unfavorable due in part to the recognition in last year's first quarter of a final write up of 1.2 million on the little features Arena project in Michigan.
Absent that write a core performance was more comparable year over year.
In the first quarter consolidated revenue increased 3.8% year over year.
The construction segment accounted for all of the growth, which is broad based outside of mid Atlantic in Western Pennsylvania operations.
As we discussed previously we continue to successfully execute a turnaround plan in the mid Atlantic region and are not anticipating any material revenue growth in that market for another several quarters.
However that branch is possible at this time.
In Western Pennsylvania, We managed the business unit to focus exclusively on service and owner direct opportunity and will not be executing traditional construction projects. There as we have in the past.
As we discussed the service segment, please keep in mind, but in our business sales and revenue or different concepts.
So it project opportunity to a customer and bucket into backlog and then we generate revenue as the project is executed.
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Okay, we will now read them.
[noise] folks, we're gonna rewind a bit we're going to go back to where JV started explaining the details of the quarter, So with that Jamie I'll turn it back to you.
Thank you Charlie I'm I won't go through the.
Assay topic, the 60 breakeven I'll start with our first quarter results. So we had a solid first quarter that reflected continued progress improving field execution cash flow generation and balance sheet management.
The quarter, Patrick starkly been are weak quarter from a seasonality perspective, so achieving net income break even is a positive development also certain year over year comparisons appear and favorable due in part to the recognition in last year's first quarter of the final write up of 1.2 million I'm, a little Caesars Arena project in Michigan.
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Absent that right at core performance was more comparable year over year.
In the first quarter consolidated revenue increased 3.8 year over year. The construction segment accounted for all the growth, which is broad based outside of mid Atlantic in Western Pennsylvania operations.
As we discussed previously we continue to successfully execute a turnaround plan in the mid Atlantic region, and they're not anticipating any material revenue growth in that market for several quarters. However that bridge is possible at this time.
Western Pennsylvania, we have managed the business unit to focus exclusively on service, an owner direct opportunities and will not be executing traditional construction projects. There I was just having the path.
As we discussed the service segment, please keep in mind, but in our business sales and revenue are different concepts.
We will solar project opportunity to customer and well get into backlog and then we generate revenue as that project is executed.
Revenue in the service type it was flat in the first quarter.
The weather across our geography was more mild than usual in the first quarter and there was some impact in the second half of March from Koby, 19, all of which impacted teamwork and some project activity. We also experienced a decline in smaller special projects failed late in the fourth quarter 2018.
Given the short sales cycle in the second service segment for this type of work the revenue impact that sales shortfall was felt in this years first quarter.
However, we did see sales rebound in the most markets in the first quarter, which is an encouraging sign.
As you can see on slide seven service sales this year increased more than 53% year over year.
The impact of Coven 19 is likely more pronounced in the second quarter. However, still several weeks away from being able to fully evaluate and quantified the impact of our service revenue.
Consolidated gross profit in gross margin were lower year over year due impart to the right of the little pieces Arena project last year as well as the impact on operations have told the 19 in the last two weeks in March this year.
Activity levels decline late in the quarter this year and that impacted both revenue recognition and our ability to generate gross profit.
Importantly, however, we expect to make up in the next several quarters much of the delayed revenue and gross profit from any in process work that was suspended earlier.
That revenue won't disappear, but we'll get pushed out several months or quarters and may end up having to accelerate in certain cases.
Nevertheless, limbach generated consolidated gross margin of 13.1% that represent a modest improvement a 10 basis points over consolidated gross margin for fiscal 2019.
Bite lingering breakdowns in southern California market other challenging project approach substantial completion, we believe we're making incremental progress in improving execution.
Adjusted EBITDA declined from 5.2 million last year to 3.7 million in the current year period as a result at the previously mentioned pray you're right up and the impact of the virus this year.
Well, we took aggressive action to reduce cost and head count in response to the impact of the virus an operation.
Those actions occurred late in the quarter and those savings were not fully reflected in the financial statements by March 31st.
Well see the benefit of those cost reduction initiatives as well as the broader cost savings projects a year progresses.
As a whole S unique sense was 12.1% of total revenue, which was relatively the same as the prior quarter.
<unk> expense increased approximately 754000 year over year due to increased salary and payroll costs offset by reductions in rent travel and entertainment and professional services.
Higher salary and payroll costs included 1.1 million, primarily due to additional headcount added to the service segment and point Sixmillion related to severance expense incurred in conjunction with head count reductions that took place the end of March.
At May 31st our total salaried headcount was 484, a decrease of 18.4 person from the year end 2019.
Finally on our own Labor force continues to contract on the Lx midfield project and it is minimal incest, but its third quarter, we expect to be wrapped up was this a startup and commissioning both of which are low risk activity.
Also on slide seven we provided a handful of key performance indicators total backlog at March 31 was 534.9 billion of which 472 million was attributable to our construction segment.
What current backlog is below the levels of December 31 on March 31 of last year in most markets overcapacity is sold out for fiscal 2020 or close to it and we're carrying reasonable backlog for 2021.
We view the current level of backlog is healthy and no cause for concern.
The decline in backlog year over year was planned is largely a function of three items first our new we're going operation book to larger projects that the backlog at the first quarter 29 team.
One of the sold out for major construction project revenue in 2022nd as I mentioned, we're confident that worked with matched capacity with opportunity over the next 12 to 18 months and we're taking a more conservative approach to sales generally answered in certain markets. We've made an intentional pivot away from larger construction projects.
Travel less favorable risk profile.
I will discuss in further detail. Shortly we expect this trend to continue while at the same talking we should continue to see an increasing service backlog, which will include smaller construction projects for directly for owners.
On the impact of a large project sales in the week what are the first quarter last year, we orchestrated a managed reduction a new sales activity in southern California and Tampa.
Our actions in southern California were intended to reduce risk, while we transition management and stabilize the operation similar to the plan we executed successfully in the mid Atlantic operation.
Our tamper business unit entered the year largely sold out it was not aggressively pursuing their work there, but first quarter.
When compared to plant sales across the company were actually more than 5% ahead of an internal expectations.
Sales of the service segment was strong through the first quarter, increasing nearly 53% year over year.
As of the construction segment sales are also substantially ahead of internal expectations through March 31.
With respect to sales are both construction and service we are experiencing some cobot induced impact.
We've not.
We're not through the second quarter, yet so it remains to be seen whether we're witnessing a trend of temporary deferrals or more substantial pattern of a definite delays in new project solicitations and more caution overall around capital investment I should know, we're continuing to perform Preconstruction engineering work on a number of significant.
Construction projects and several proven branch operations. These projects appear to be moving forward, which should result in future additions the backlog once contracts are executed.
We haven't will continue we're just manpower and overhead resources accordingly based on our pipeline of activity. We're also redirecting resources to older direct and service opportunities are reducing our construction sales resources in several branches, where we have made a strategic decision to rapidly expand or owner direct services.
Irrespective of what's happening in the market, we will not pursue revenue for the sake of revenue.
Each opportunity, we identify and pursue must meet enhanced risk management parameters and generate acceptable risk adjusted returns.
We experienced another quarter of strong gross margins in the service segment, where margins increased 182 basis points year over year.
Going forward, we expect owner direct business mix, we are targeting to support segment margins in the low to mid 20% range.
On a quarter to quarter basis that figure will likely bounce around a bit but on ongoing basis, we expect it to stay relatively level here rather than continue to expand however, we do expect to see increasing growth in gross profit dollars going forward as the segment revenues grow.
At this time I don't have any material update to provide with respect to claims collections, we continue to engage with counterparts and to explore and pursue various options for resolution in each case, we're focusing on maximizing our results as we have communicated before these processes may take time and while we believe its path.
Well there will be a resolution on certain claims this calendar year other projects will likely be resolved in 2021.
He focused on maximizing liquidity and improving working capital management is quickly becoming a part of our daily discipline as evidenced by our first quarter is positive operating cash flow, a 3.5 million given evolving environment, where again, providing a post reporting period snapshot of our liquidity position.
Although we're not reporting financial results for any period subsequent to March 31st as you can see on slide eight our cash balance in over all liquidity position continues to improve.
We ended May we had 16.7 million in cash on the balance sheet and total liquidity at 27.2 million.
By enlarge this success with cash and liquidity results from a greater focus on ordinary course activities, such as invoicing billing and collections and does not reflect any substantial collection of clean proceeds through may 31st as Charlie just noted.
It remains a great team effort as before we have not seen any slowdown in collections have not identified any new credit risk among our customer base and do not have any material exposure to the retail energy or multifamily markets.
[noise] lovely to address a few final points before we pivot to an update on the way strategy.
Well, we're experiencing greater levels of morality in every market.
Compared to even just a few weeks ago, it's clear that the impact of the economy from the national shut there has been substantial.
Well leave predictions about the pacing trajectory of the economic recovery to others, but we are anticipating a planning for choppy waters, which we believe is the white approach for limbach that means continued focus on liquidity of working capital management extreme discipline with respect to project sales a new project selection and continued focus on making fundamental.
Changes to the company's cost structure.
The current backlog is stronger provide solid revenue visibility over the next 12 to 18 months, we like the margin profile, including the handful of large projects that will be executed and our strongest locations with the best resumes and large project construction in those cases working at the right branches for the right customers.
Without the need to sell multiple large construction projects elsewhere, we can remain focused on execution discipline and growing our older direct business without impacting margins in the near term or losing operating leverage.
In the past they've stressed the importance of geographic and market diversity, especially when facing a market downturn.
But buck retains a diverse resume allowing us to shift resources for active at attractive market sectors. The current environment, We see health care R&D labs for biotech and pharmaceutical companies as well as data centers remaining fair reactive.
Over the next several quarters of years, we also see select compelling opportunities and education Entertainment and government and we think there's an interesting upside and optionality in the industrial manufacturing sectors with all the discussions with onshoring of manufacturing.
Expected period of prolong interest rate should also support additional investment in all of these areas.
Irrespective of the trajectory of the recovery, we anticipate that we'll continue to benefit from our breadth of diversity in geographies services customers and projects that has served us well in the past that we see the reason why wouldn't have a future. Additionally, the last several months appear to have validated the essential nature of the work we perform.
There were limited exceptions and their ongoing uncertainties, but on a whole we interpret the evidence to suggest that the future widespread wholesale sensation of construction activity on a pro forma basis is unlikely event.
Certainly with our service segment existing buildings must be maintained.
Certain maintenance projects can be deferred for a period of time, but eventually equipment fails. It must be replaced that's the beauty of our service segment.
So with that want to nail church you strategy, we offer an update on how we're thinking about the evolution of the business model.
We're heavily influenced by our own experiences over the last several years as well as by opportunities, we're seeing under construction and building services markets broadly.
Slides 11 through 15 captured the substance of what I'll be discussing.
To begin we've worked with the board over the last six months to restructure the executive leadership team.
The goals work to bring together were small group of individuals with a diversity of skills and experiences.
We wanted to create a structured business capital decisions can be made efficiently and on the basis of input from individuals having multiple and often different perspectives. This group interfaces, most often with the executive committee of the board. This new structure is working well it has led to more rigorous debate and a broader consensus throughout the larger imagine management.
These discussions have yielded three key initiatives that I want to introduce briefly.
The first core initiative is to redefine the risk management paradigm.
With specialty contracting money is made or lost the field for too long Livebox performance at the project level has been uneven.
The last several years in particular operational excellence across many branches has been overshadowed by the impact of write downs on a discrete projects in hindsight. These projects should have warranted a further or more critical review during the sales cycle based upon a number of factors for the lack of strong customer relationships to the availability.
Local labor.
To care that risk, we have substantially modified our get work processes to emphasize local market capacity and project characteristics like size duration.
More stringent sales filter that's administered with greater sexual authority less local autonomy will drive better funded decisions that together with more rigorous internal viewer project order process leads to improved back and outcomes with less variability.
We're redirecting a turtle resources to support these projects reviews and audit initiatives.
Additionally, we need to increase utilization of our design and engineering capabilities, both during the sales and planning phases.
Juicy cost them scope and control the budget and schedule all mitigate project risks importantly, leveraging these resources also depresses, our customers and facility owners and that leads to stronger and more profitable long term relationships.
Our second quarter initiative is to maximize cost bid profitability and cash flow simply put the company needs to generate better returns in stronger cash flow, we must execute more consistently in the field as Charlie just noted.
Well, we made significant strides in the last several months improving working capital management through greater accountability, we need to institutionalize the effort and make it sustainable.
We also need to monetize the project clean you continue to analyze our operating costs, including the way in which we do business internally with an eye towards improving business processes.
As we think forward we need to apply the same degree of rigor to investment decision, including how we hired to support growth initiative.
The Keating well in these areas drives more consistent and substantially greater cash flow generation.
We'll experience reduced borrowing in capital costs, which will allow the organization to become more flexible and responsive overall. This is critical to our ability to regain the offensive and to leverage the company's design and engineering driven and to be images to move the business forward into a new era.
Our third quarter should if it's to expand on a direct offerings for almost 120 years Limbach has made money and large construction projects.
We've had some unbelievable talents excuse me, we have some wonderful people talent and experience throughout the organization and in many markets large institutional facility simply don't get built a less Lubbock is building.
In those markets with the history of success in executing large projects will continue to pursue those jobs, but we'll do so subjecting gated process. We've noted.
As the industry has evolved however, the traditional large project contracting structure has shifted to one where the risk reward profile that can be balanced and an equitable.
Without proper controls a disciplined we can find ourselves.
Too far from the facility order and source of capital and less able to control our destiny.
Even with our broad diversity the market can be cyclical well limbach is always found work and challenging markets as too often have worked with on attractive risk adjusted returns. So as we think about allocating capital across the business over the next several years.
Focus will shift to all of direct work, where we can engage directly with the facility owner to demonstrate livebox value propositions and capture and leverage the ongoing relationship.
Today. This model is broadly represented by our service segment, which includes everything for revenue, we generate from maintenance contracts to small pull through projects and other work performed direct Willi food building owners. This project work to be larger and often is but irrespective of size livebox positions the value chain as more substantial and controllable.
Across the various products and services, we provide today, our focus for new investment will shift towards small and midsize projects with an occasional large scale project, where we have the proven resources and solid customer relationships as a general rule the shorter duration projects that we believe to lead to long term building systems.
Building maintenance relationships with the building owners based on historic experience, we anticipate greater consistency of project outcomes and higher overall margins. This approach has been longer feature of our model, although more so in certain locations that and others from this point forward, however will become sexual to how we operate.
Across the organization.
Importantly, we're also building at leveraging relationships with facility owners to capture not only traditional maintenance services, but also a new generation of digital technology enhanced products. This new offering better leverage blue collar labor and white collar design and engineering capabilities to generate stable high margin revenue streams.
To be clear large construction remains our core competency at a critical offering in the foreseeable future subject to the news risk management structures. I've. Just described we're confident that this is a profitable lot of business that we can earn acceptable returns and those markets with experience and capacity to handle the work we have some great general contractor concern.
Trucks manager owner relationships and we intend to remain critical partner for those groups going forward.
Also we however, we are striving to accelerate the construction to service transition that we've been commenting on for several years in 2016, the year, which limbach became a public company. The service segment accounted for just over 80% of consolidated revenue and just over 30% of gross profits on an annual basis through the first quarter.
I was accounted for almost 21% consolidated revenue and given our focus on margins a greater share of gross profit at approximately 41%.
We have previously spoken about transitioning to a revenue split of 70 30 by 2025, but we are now striving to reach a 50 50 balanced by them.
We believe we could achieve this by limited construction revenue to only the best opportunities in the marketplace by redirecting resources to expand our older direct pipeline from there we see exciting opportunities to bundle technical service is built on a robust digital platform. Many of these opportunities are under development with some more advanced than others.
We have more work to do in that respect.
But we see a future were limbach is perceived as a dominant technical services from that can provide end to end solutions for critical facilities systems collectively these initiatives should lead to greater and more stable cash flows a more defensible market position and better leverage at the company's diverse competencies with that.
We'll take your questions.
Thank you at this time will be conducting a question and answer session. If you like that question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Q you may crestar too if you'd like your with your question from the Q for participants using speaker equipment, maybe necessary to pick up your hands that before.
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Our first question comes from the line of Brett Feldman with D.A. Davidson. Please proceed with your question.
Great. Thanks, good morning.
Good morning, Brent.
Charlie.
Maybe you know off your strategic comment that I guess I'd be curious kind of what the the new parameters or cap on size of large projects.
You are willing to go after here you know going forward.
Sure.
We're still looking at some very large scale projects.
In certain market.
Geographies like Ohio, Michigan, we've executed some of the largest projects in the history of the company very successfully very profitably and with positive cash flow. So in those particular geographies. We'll continue to look at projects that are very large scale. Gil 30, 40, 50 to 100 million. So we're not ruling.
That out when you look at other geographies where.
We're kind of making that shift to more owner direct.
Goes will probably be able to smaller side, but you know with select relationships with certain general contractors and construction managers I can see you know doing 510, 15 20 million dollar projects.
What we're doing at this point, Brent and we put us in place, it's either 15 or 18 months ago, we have a standing call every Friday morning that any branch could present, a project that's valued over seven and a half million dollars to our risk management Committee.
So we take a look at them I think we've seen some really good discussion, it's led to saying no to certain projects and it's led to I think some dramatic enhancement of.
The proposal in terms of margin as well as what we need to see in our contracts. So we're not ruling out large scale projects. It's just that I think we're going to have much better risk management processes in place and we need to see that the competency is there within the branch to handle the project are taking on and that they have the resources to execute.
Okay. Thanks for that Charlie and then.
Yes.
Beyond the the disruption that you're experiencing and certain region here.
Just be curious kind of the levels of bidding and quoting activity, you're seeing kind of what the.
With the pipeline for new work opportunities looks like out there in this environment.
Now, let's let's break it down to.
Construction in sort of salt comical both segments on the construction segment, there, there's still quite a bit of opportunity out there, but clearly we've seen over the past couple of months people not making the decisions that we were used to seeing its dragging out a bit people holding off.
And I've spoken to a number of Ceos of general contracting firms over the past wanting to have actually been having a standing coal with a group of other Ceos to deal with the virus and how do we protect our workers in the field, but we can't help ourselves, but the talk about how the business climate is and what Youre hearing from everybody is still the mayor.
Your projects as they but looking at have not stop there there's still a discussion, but just like I said decisions have cooled off a bit I think everybody's just doing a wait and see.
But the good news for Limbach at this point when we look at where we stand with backlog we're sold out in a number of our branches and we're looking for some smaller work would hit quick hitting stock, which generally falls into what we call SPD special projects as well as the our service projects, but for the most part our backlog is sold so were.
We're looking pretty good for this year now.
Well the service segment, what we've seen happened is.
Our time and material spot work emergency strike work is still continuing were disrupted a little bit with some riots. We were told that we had to leave the city areas a bit earlier in the afternoon, but for the most partner still doing that work and that's that's remained fairly robust.
In terms of preventative maintenance sales, we've seen a pullback on that's mainly because people don't want to see the buildings right. Now. So I think that's unfortunate we already have a good maintenance base of goes but sales were a bit soft with that.
But the rest of service, we're still seeing a pretty robust pipeline.
If something is breaking that's the beauty of service, it's got to be fixed. So that's we're seeing JB do you have any other color she'd like to share rather.
Okay.
Okay, Great does that give you enough colors or any specific markets you'd like to talk about restaurant.
No that that's held for Charlie and I guess my last one I.
Understand you guys aren't providing guidance, but any near term directional parameter can provide your everything kind of handicap or.
The delays the easy experience.
Quarter to date with some of these cobot disruption should we should we think about you know something a little lower in the second quarter and then.
Hopefully be pick backup in the second half.
Just looking for some qualitative commentary there yes. So when you look at the dynamics of the business. The majority of the business kept going like this sort of the construction side, we did face the shutdown in Boston in Cambridge with a couple of major projects of there that we're sideline, but we continue with prefabrication, we didn't stop.
We had similar situation up at Michigan on a few projects, but actually it was it was good because the prefab, we had a backlog of what's to stop we needed to fabricate. So we kept go and the clients kept pace. So.
Well, we couldn't work on site, our fabrication shop facilities actually continued we also had some emergency work come in there wasn't a substantial but we saw.
We did convert a convention center into a acute care facility that happen like overnight 10 days that was unexpected revenue. So we've had a few things like that happen. So I'm not sure how the numbers going to shake out yet for the quarter, but I think we had some pullback, but we also had some other revenue too.
Offset some of that pullback.
It's probably the best I can share right now.
Okay Fair enough I'll pass it on thank you next spring.
Thank you once again as a reminder, you would like that so question. Please press star one.
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John.
Metal Investor. Please proceed with your question.
Thanks, Charlie for everyone for holding the call.
Just quickly in Europe.
And the release you talked about.
Gross margins, improving and in coming quarters, and then in your prepared remarks.
He discussed the cost.
Chilling initiatives and how those are just sort of getting started and.
Where where where do you expect where do you where you where do you hope those to sort of.
And up what's the what's the what's the.
Well the goals for yesterday was 12%.
To the specific goal.
Maybe 11 or less.
Okay and gross margin improvement can you maybe can be more specific as to what you where you expect that so.
At the land.
Yes, Joe Thanks for the question. Thanks for joining us. This morning, so first off on the gross margins.
You know our service margins in my remarks.
I think we're starting to hit a good strides there.
The.
20 to mid Twentys, and I think that's where we're going to continue to see those numbers.
Land, we're going to keep pushing hard to see more but I think thats a reasonable expectation on the construction site as we continue to work through the challenges of pass backlog, especially out southern California with that work wrapping up we do expect to see construction margins pick up so we're pushing hard to that and I think we'll see that happening.
And the future Jamie could you comment obviously at eight plus years of FTD, we have.
Our working through our cost reduction initiatives and I would say more.
But as you look at it holistically over the full year that we probably anticipate to be.
A few percentage points over last year 2018, without taking into consideration any incentive comp.
Lastly, we didnt have any incentive comp in our numbers and for 2019, and so that would just be credit card to additional add on top of those numbers for the full year because timing of what our cost reductions come in is it's fluid right now as we're still working through that and as well as we're looking at.
Different did do furloughs, and layoffs and how we're anticipating that head count to return.
And the timing on that.
And is expected to be higher than last year I'm confused there.
Core basis, because we grew from if you look at Q1 as we grew throughout the year headcount was added throughout the year do we exited the year to higher level.
So total year over year is basically what I'm coming it commenting on.
On the margin, where they're just the absolute dollars absolute dollars glassia dollars, okay, but you expect the margin to be lower.
Hi absolute dollars.
But you expect the margin to be lower correct.
Gross margin.
No. Thanks.
We named margin.
He said it depending on how we exit the year from a revenue perspective, I don't necessarily know yet for that percentage. It is what we're you know John were taken a really.
No I think a very strategic focus on.
Head count reduction I think I think we executed well during Q1 to reduce headcount.
Based on what we saw happening and I think a lot of that's that were made permanent the other part is we're looking at other processes of the company.
Both purchasing as an example, we see as a store opportunity to reduce costs.
So we're looking at all aspects of that and we've got a very very focused effort that's actually be led by.
About cats, one of our executive Vice President So I don't know the exact outcome of that yet, but I think you're going to continue to see continued improvement he's identified some some terrific opportunities.
On the.
Great job on the on the cash side. So if you now look at your so net net debt.
Listen its way down.
Great Great Capsulation, so as you look towards.
Paul I believe you give you can refinance.
Facility sort of you know.
MS late fall without any penalty.
Have you started working on that and what.
Good.
Are you thinking about.
[music].
Are you thinking about that and then also if you could just add.
And at that 16 million is which is terrific. It doesn't even include much of the charge back collection.
What is the total that still available there.
But just sort of a broad question on on refinancing debt and and.
So the future size of the potential cash collection.
Okay I can assure you John refinancing is higher plus.
And we got to continue to execute so we're very focused on executing.
Our business strategy and also performance focused on bottom line, so we'll be entering the market.
This year looking to see where we can do with that refinancing. It's just a question of timing, but management is extremely laser focused on she will get due to make that move as quickly as possible.
No on the cash where we stand today I think the company's performing much better than we have the pass that we're going to continue that that stride was very interesting. When we saw the virus hit I just wanted to the management team is the guys have an idea that these three things are the most important things stay safe get cash.
Cash get working on the get cash side, it's been remarkable how we just really hit that hard and I want to credit our customers are customers listen to us and they helped us and we I think we're in a much better position and now I think everybody's you'll see me opportunity and where to continue to push very hard on that.
And on top of all that we still have these claims to get resolved, which will be future cash coming into the company. It's just the are always a question on timing with those you were not going to just walk away from opportunity to get a couple of books of the door, we want to maximize our position. So we continue to work that very strategically so I hope that answers your question.
What's the size of the receivable currently.
Oh, the receivables in terms of the claims yes.
I can't divulge that number John it's okay. Okay.
Yes.
Sure if customers listening and all this call okay.
But is it fair to say that.
In the six of them.
18 million balance the incredible improvement you've shown.
Very little that has come from.
The from that.
Collection opportunity so that.
Still sort of most of it lays lies ahead of US that's that's true yes, okay. Okay great.
Okay. Thank you for your thank you for your time.
Thank you once again as a final reminder, if you would like to ask the question. Please press star one on your telephone keypad for participants you think speaker equipment, maybe not third pick up your hands that before passing the Starkey one moment. Please open more question.
Yes, no further questions at this time I'd like to kind of call back over to management for any closing remarks.
Thank you operator.
In 2008, we hit the start of the great recession and back then like today, our diversity in sectors customers and services along with being essentially.
With solid project backlog led to 2009 to 2010, a strong performance years for the company.
While today's economic environment is different the basic strengths of limbach remain in place and our strategic plan will only improve our opportunity to deliver better economic results to recap todays call.
First our leadership team is dynamic and interfaces regularly with the Board's Executive Committee, we're making decisions are moving forward with market opportunities to our focus is on economic results applying our risk management processes, which stripped oversight on as DNA.
Three the balance sheet or focus the strengthening our balance sheet to support our growth ambitions is a core focus management I think we talked about that just about every day.
For our strategic focus on rapidly growing our building owner relationship supported by a suite of technology offerings will separate us further from the competition and five Limbach team has some of the most dedicated and talented experts in the industry. How we dealt with the virus crisis was exceptional ER.
Because of staying safe very few people became sick with the virus get cash we just talked about liquidity in our results and get work the innovation that was created.
So impressed me and so many people within our business that outside our business just outstanding results by our people.
Thank you for attending today's call, we'll look forward to presenting our Q2 results in the future. Thank you.
Thank you. This concludes today's teleconference. You may disconnect your lines. The fine. Thank you for your participation have a wonderful day.