Q2 2021 Limbach Holdings Inc Earnings Call
[music].
Greetings and welcome to the Limbach Holdings second quarter, 2021 earnings call.
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I would now like to turn the conference over to your host Jeremy Hellman of the equity group. Please go ahead.
Thank you very much and good morning, everyone yesterday, Limbach Holdings announced its second quarter of 2021 results and filed its Form 10-Q for the fiscal quarter ended June 32021.
During this call at the company, we will be reviewing those results and providing an update on current market conditions. Today's discussion may contain forward looking statements and actual results may differ from any forecast projections or similar statements made during the earnings call listeners are reminded to review the Companys annual report on Form 10-K, and quarterly reports on form eight.
Thank you.
Risk factors that may cause the actual results to differ from forward looking statements made during the earnings call.
Beginning with this year's first quarter Limbach is updated the naming of its reportable segment financial results to more closely align with its evolving business model and relationships with building owners to reportable segments are now general contractor relationships, which you referred to as GC or an owner direct relationships or O D. R. <unk>.
And it's aligned to the prior construction and service segments respectively.
Description of each reportable segment can be found in our Form 10-Q. This renaming of the reportable segments does not create any material differences when applied to prior periods with that I will turn the call over to Charlie Bacon, The President and Chief Executive Officer of Limbach Holdings.
Good morning, everyone and thanks for joining us joining me today is our CFO Jayme Brooks. We also have our CFO, Mike Mccann and our executive Vice President Matt Katz also on hand for the Q&A session, which will follow our prepared remarks.
The quarter and year to date results continue to demonstrate solid progress in our OTR segment, the growth of which is quarter our strategy of transforming the business to be more aligned with direct to building on our revenue and the resulting recurring income streams.
We also realized progress on the GC or front, two with solid sales during the quarter, enabling us to have our forecasted 2021 revenue for the segment fully covered at this point, including amounts recorded a backlog and with customer commitments.
As a reminder, we are targeting 50% of our revenue to come from building owners through our OTR segment by 2025.
The remaining 50% is to come from our <unk> segment projects with but net expected results being significantly improved profitability.
Our OTR segment has historically provided higher margins for our company.
We're making substantial progress towards our business mix goal OTR sales increased roughly 28% to $38 million during the second quarter up from $30 million in the first quarter.
The prior period in 2020, our OTR sales grew by approximately 27%.
I should note sales at the beginning of the second quarter started off slow, but may and June sales showed improvement with our OTR pipeline continuing to grow.
We realized strong maintenance space sales in the OTR segment during the quarter with improvement in our renewal rates and an increase in our OTR project sales pull through revenue from our maintenance space. During the period also improved which appears to be driven by pent up demand for our core maintenance services.
We're also exceeding gross margin performance in our OTR segment with year to date margin of 29, 3%.
May recall from previous statements, our OTR gross margin should be about 25% to 28% range.
Our <unk> teams are executing and exceeding expectations.
On the <unk> front I want to point out two very important moves we made earlier this year.
First as we discussed in our last call. We made further investments in our largest sector healthcare highlighted by our new office in Nashville, which is the hub for profit health care in the USA and we recruited a regional vice President who has great relationships with our targeted customer base.
With this investment we are also expanding our services within healthcare to include professional services for building assessments and program management services by combining our mechanical electrical plumbing engineering and installation knowledge with program management services, we are creating a unique offering in the marketplace the health care.
Sector remains well suited for us since MEP systems can be upwards of 50% of the value of many health care projects.
These health care clients are very concerned about system installed and operating costs. These new services will help customers make better decisions. We expect this approach will place us in an ideal situation to pick up the installation services.
On our last call I mentioned, we expect it to have upwards of eight forums underway since our last call. We have secured five of the eight and several others are in the proposal stage.
This market is very active and refining the four management teams value our strategic insights industry expertise. These.
These projects required unique engineering solutions and there was considerable maintenance requirements, which is ideal for us.
So to sum up our OTR progress, we expect to see revenue growth within the segment in excess of 25% year over year, while margins are exceeding our previously communicated range was driven by strong execution sales are picking up and our maintenance space is expanding at a strong rate.
We were disappointed with our slower sales than expected earlier in the year.
That appears to be behind us so long as the Delta variant doesn't cause large impacts to the economic expansion. The U S economy is enjoying.
Returning to the <unk> segment sales have exceeded expectations for the quarter and year to date healthcare continues to be our strongest market sector with several new hospital projects being sold including several in our Florida region.
While we have a few larger projects that were brought into backlog most of our sales in Q2 were smaller projects, which aligns with our risk management strategies.
At this point, we have sold including amounts recorded in backlog and with customer commitments, what we need to reach our segment forecast for 'twenty, one and sales going forward are mainly targeted for building backlog for 2022 and beyond.
Overall execution of our work this quarter continued with project exit margins, improving even though we experienced higher cost of materials and delays in our supply chain for equipment for manufacturers on specific projects. So far this year were able to mitigate those impacts of higher cost and shortening the period.
During which our proposal prices or valid to limit our exposure and increased cost in the supply chain.
Other efforts to be clear.
Our proposals are now limiting the.
That the proposal will be valid therefore.
Supporting any sort of increase in prices in future periods.
Before I pass this call onto Jamie I wanted to discuss our updated guidance, which we are tightening based upon our reported results at mid year and visibility for the remaining six months. When we introduced guidance last quarter. We noted that activity levels look to be picking up but that we had yet to see that to be a durable trend.
While overall activity levels have continued to improve there remain pockets of softness that could delay achievement of our expected results.
Based upon the revenue burn projections and as we mentioned in previous earnings release, we are expecting heavier revenue and profit recognition in Q3 and Q4 of 2021. We are also expecting improvement our GC our margins based upon the quality of work sold over the past 18 months.
As noted in our press release yesterday, our revised guidance is now $480 million to $510 million and adjusted EBITA guidance between 23 and $25 million.
Both of those ranges are consistent with our previous guidance and reflects a tightening within those prior estimates underpinning our updated guidance is the improved confidence that stems from a combination of our reported results to date and work currently scheduled for the second half of the year as noted earlier, we have all of our forecasted GC.
<unk> work for the year in backlog and with customer commitments, our OTR segment, consistent booked backlog customer commitments contract maintenance space and pull through work is not far behind.
I want to close with a comment on the COVID-19 Delta variant during our second quarter last year. The pandemic had a significant impact on our business generally economic activity across the country slowed which impacted our work activities somewhat however, our business was deemed essential which allowed us to maintain.
Lower but regular levels of operation on the other hand, our SG&A expenses were lower than it would have otherwise have been due to operating reductions we implemented in response to the pandemic.
We're also awarded emergency response work, which aided our results last year, but that work with short term and nonrecurring.
As we speak with you today, we are monitoring the COVID-19, Delta Varian, including both positive and negative short term impact.
However, we are focused on expanding long term recurring business that will build a stronger company when the economy returns fully toward normal cadence so with that let me turn the call over to Jamie.
Thanks, Charlie.
Total second quarter revenue of $121 million was down 10, 5% as compared to the prior year and up six 8% from the first quarter of this year.
For the six month period total revenue with $234.4 million a decline of 14, 5% compared to the same period last year, which is consistent with our plan and guidance for the full year.
By segment GTR revenue of $87.6 million was down 17, 4% from last year's second quarter and up three 2% versus the first quarter of this year.
For the six month period, Gcs revenue declined 20% to $172.4 million compared to last year's second quarter again. This is consistent with our guidance and internal plan.
OTR segment revenue of $33.5 million in the second quarter grew 14, 4% compared with the same period last year and 17, 3% compared with the first quarter. This year.
<unk> segment revenue accounted for 27, 7% of the total consolidated revenue during the quarter.
For the six months <unk> revenue was $62 million up from $58.5 million for the same period last year.
Gross margin was 15, 4% in the second quarter up from 15% last year.
Ods segment margin continued to be a bright spot outpacing our expectation at 29, 3%.
Ccs segment margin slipped to 10, 1% compared with 11, 5% a year ago.
The decline this quarter compared to last year was primarily due to projected burning at lower margin.
From a project execution perspective, net write downs improved from $2 million last year to $1.1 million in Q2 this year.
SG&A.
<unk> was $17.2 million in the quarter up from $13.8 million last year.
Our operations were significantly impacted by pandemic driven cost cutting.
Second quarter SG&A expense was the level with this level with our first quarter and consistent with the full year expectations. We discussed on our last earnings call.
Interest expense during the second quarter with 450000, compared with $2.1 million a year ago. This marks the first full quarter since we entered into our current credit facility in February. So this quarters financing expense represents the first full quarter for purposes of modeling the run rate of our finance expense.
For the second quarter of 2021, adjusted EBITDA was $3.6 million compared to $8.1 million for the same quarter last year and $2.1 million in the first quarter of 2021.
The second quarter of 2020.
Typically from certain SG&A expense categories, such as payroll costs and travel and entertainment being unusually low due to the reductions taken as a result of the pandemic.
Adjusted EBITDA for the first six months of 2021 was $5.6 million compared with $11.8 million in the year ago period.
Net income for the quarter was 732000 or <unk> <unk> per diluted share versus net income of $2.9 million or <unk> 37 per diluted share for Q2.2020.
Total backlog at June 30th with $439.5 million compared to 4 million 46, 4 million $46.5 million as of March 31, and $444.4 million as of December 31, 2020.
On June 30th JCR, and Ods segment backlog accounted for $378 nine and $60.6 million of the consolidated total respectively.
Shifting to the balance sheet and cash flow. Our current ratio on June 30th was $1.45, which compares with $1.46 as of March 31, and 133 as of December 31, 2020, we.
We had cash and cash equivalents of $27.7 million and $33.5 million of total debt as of June 32021.
$8.5 million of that total debt was classified as current and $24.7 million net of issuance cost was classified as long term.
Shifting to working capital, we had cash usage from operations this quarter of $7.2 million, bringing our year to date cash usage from operations to $24.6 million.
The primary drivers of this year to date usage with an increase in accounts receivable due to the timing of billings and collections.
A decrease in our accrued expenses and other current liabilities due to timing of payments and a decrease in our overbill position due to the rejection and GC our revenue in 2021, and the timing of contract billing and the recognition of contract revenue.
Decreases were offset primarily by an increase in accounts payable, including retain age as compared to the prior year period.
I will turn the call back to Charlie now.
Thanks, Jamie I want to close with some thoughts about the general macro conditions, our strategic direction and our overriding vision for limbach.
Concerning the market outlook, the American institutes of our architects inquiry design contracts and billing indexes all remain in very positive territory with the inquiry index recently recently hitting 72, a strong indicator of continued industry expansion.
The construction industry round tables third quarter sentiment index is at an all time high of 79.7 with a design index at $86 eight a year ago. These indexes stood at 52, one and $49 three this points to a continued robust period for the industry over the next.
Nine to 12 months, allowing us to build strong selective backlog for 'twenty two and beyond.
Now turning to our strategic direction.
Our emphasis on growing our OTR business is well underway and having the intended impacts on our margins. We previously stated in 2021. This was going to be a year of transition for the company as we focused aggressively on growing our OTR segment, while overhauling how we approach GC are and we are.
We're executing that strategy, while recent COVID-19 developments represent a headwind we fully expect to end 2021 with <unk>, making up the largest portion of our revenue it ever has and contributing greater than 50% of our consolidated gross profit.
Where that ultimately lands will be a function of our final business mix, but based upon current projections, we expect to exit this year with gross margin improving approximately 150 basis points versus 2020.
That is a level of improvement we've been talking about for some time.
Second we are right sizing, our <unk> business and are confident the changes we have made to our corporate culture in that segment, particularly in terms of our sales and project evaluation approach have changed for the better during the second quarter. We saw <unk> sales pick up quite a bit leaving us confident that we'll be able to resume growing that.
Be able to do so with much improved bottom line performance.
We will remain firmly committed to operating the <unk> segment with a bottom up profitability mindset and expect it will yield solid results going forward.
Third we will continue to focus on market diversity as we've seen over the last year and a half our end markets have each reached uniquely reacted uniquely to the pandemic with some negatively impacted in the near term such as higher Ed while others, such as health care have seem to see the demand and thus facilities need inquiry.
This also includes our entertainment and R&D sectors.
We're also keenly focused on the emerging sectors, where we think limbach offers a compelling value proposition for building owners indoor agriculture is such an example.
Lastly, I want to reiterate the progress, we're making against our key deliverables driving growth in our OTR segment is a top priority you have heard us discuss at every turn as.
As Jayme highlighted OTR segment revenue grew 14, 4% in the second quarter compared to the same period last year and 17, 3% compared to the first quarter this year Ods.
<unk> revenues account for 27, 7% of our consolidated total in the second quarter. So, we're making solid progress driving our mix shift towards the 50.50 goal.
We've also stabilized our GC our operations our net write off write down performance has improved and we're just about done burning old business that was booked before we instituted our new project gated criteria.
With the sales and backlog commentary, we already noted we are firm in our belief that 2021 will be the low point for the segment.
Turning to our expenses our SG&A expenses for Q2 was virtually unchanged from Q1 and tracking to the full year estimates we discussed last quarter. So we think we have our operating expenses well in hand, thanks to Jamie and her team.
While the Delta variant of certainly occupying its share the headlines we are encouraged to see an infrastructure bill advancing your Congress as this becomes a reality we expect several submarkets within the nonresidential section of construction will benefit our significant funds were made available for capital projects.
Two our limbach in Harper teams. Thank you for your hard and smart work this past year.
Change in transformation isn't easy, especially working remotely.
We are achieving what we said we would again thank you.
With that we're available to take your questions.
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Our first question today is from Rob Brown of Lake Street Capital markets. Please proceed with your question.
Hi, good morning, nice job on the quarter.
Good morning, Rob Thank you.
Yes, we just wanted to kind of follow up on your comments about the <unk>.
<unk> business.
I think I think margins in the quarter did you say that this is sort of it would be the low point in terms of margins and I guess, how do you see the gross margins in that business trending over the next few quarters.
Yeah, Mike respond to that our chief operating officer.
Rob.
I think from a margin perspective, I think we talked about this a little bit but the you know as we work that we've sold before our more rigorous risk management procedures and processes that work is really starting to burn off as the work that we've sold in 2020 one as based upon obviously.
Very close watch from a management perspective should produce higher margin and we anticipate that as we go forward. So we're very careful from a size of projects. We're looking for controlled outcomes as we as much as we can the other thing too that we've we really look forward to its not just narrow the criteria, we look at things like new new vertical.
Market sectors that we're in for example, the indoor agriculture that we mentioned before.
Whether it's size or specifics new vertical market sectors. We are looking to make sure that we are looking at that from a risk management perspective. So long story short I think is that newer more rigorous risk management work.
Starts to come into play the margins will pick up as we go through the back half Rob it's been interesting.
Installed this whole gating procedure on new work.
Every Friday morning, we have this review call, where the business units have to present their opportunities and theres criteria that they have to.
Bye bye and we see the clause actually increasing what we're seeing more and more projects go through that which is an indication of the pipeline is improving but also the quality of the opportunities are improving too because they know they're not going to get the projects approved if we don't like the numbers.
The other thing I'll just point out we have this new indoor agriculture sector that we've ramped up over the past year and actually every one of those projects are going through that review process. We just approved and we secured a small form $500000. It's a quick hitting.
Equipment installed in an existing building.
That's kind of the rig we're putting into it anything that we're looking at that were either it's kind of new to the company, maybe or just has some aspect that it's new to what we're used to doing has to go through that rigor. So the outcome of all of that we are seeing continued improvement and upside and the proof of that really is just when you.
Look at the.
Work booked over the past 18 to 24 months, we're seeing a consistent pattern of upside coming into the business. We still have some legacy stuff. We're working off that backlog that we sold years ago, just about through the books, but it's it's very encouraging to see a leading indicator of the new work produce upside.
Okay, Great and then on the owner direct business.
You talked a lot about some pent up demand coming through in the maintenance side and really good growth in general in this in this business, what's what's sort of the visibility about continued growth there and I think you said, 25% plus growth.
Do you see that kind of continuing here for the rest of the year and into next year.
So it was interesting last year, we during 'twenty like Limbach I guess ever.
Body else, we all pulled back on expenses to minimize because we werent certain of our future right.
Everybody pulled back and we also saw the building owners pulled back last year a bit that they werent spending typically what they had spent in the past, but the reality is you can't collect that for too long sooner or later you have to repair things. It just things break or they reached their life expectancy, so where they held back last.
Year.
That's why I'm, suggesting you will the pent up demand is fueling our growth on top of quite frankly, we've invested heavily and more sales resources more management to expand the OTR segment. So our growth projections. We still believe there are so much more in front of us.
And that's why we're continuing our investment and we expect our investment to continue to ramp up.
Okay. Thank you and then just wanted to touch on the supply chain.
And cost issues that.
You talked about.
How much are you seeing those are they getting kind of better or worse at this point in.
What's sort of the risk that is cost move how much risk are you exposed to as cost move.
Rob I'll take that one I think it was it's been kind of interesting from a period of time in Q3 Q4, 'twenty, we started to see that acceleration from a cost perspective, whether that's in our business as copper steel.
<unk> was another big piece of it as well.
One of the things that really helped us as we were strategic and selective in Q4 and Q1.
So lots of.
The work that could have been affected.
Werent wasn't necessarily affected as much during that period of time.
One thing that we've done internally is very important is from an awareness and training perspective to make sure that people understand that our proposals that used to be good for 60 to 90 days, maybe only be good for five days.
So that's one of the most important things we have to qualify our proposals the other thing from a customer perspective too with the volatility as they have to order equipment and materials immediately where in the past things would go through a bit of a process. So we've been using that not only from a risk management perspective, but from a leverage perspective in order to make sure that we can get sales going.
So theres a lot internally that we're thinking about whether that's qualifying proposals, whether that's using that to breakout packages to get sales run early whether that still whether that equipment or materials. After we have to procure early.
So the initial shock of that period of time between when those materials started accelerated now I think we've got our staff really laser focused on making sure that we mitigate that risk and leverage this opportunity as well.
Okay. Thank you very much for the color I'll turn it over.
Thanks, Rob.
The next question.
<unk> is named.
Hey, Mark of Onemain capital. Please proceed with your question.
Hey, guys good morning.
Given.
It sounds like working capital is eating up a decent amount of cash this year.
You guys think you can get some of that back between now and year end do you think.
Do you think the year is a positive free cash flow years, and end up being a negative free cash flow.
Hi, Yes. This is Jamie.
It would be.
The guidance that we're providing for the back half of the year, obviously thats our strong half a day of the quarter. So for me EBIT perspective, an EBITDA perspective, youre going to see.
Generation of income and the <unk>.
Thats going to fluctuate is going to be the working capital that we need to.
Depending on the timing of when those sales were actually recognizing we can build that revenue.
The piece that we'll just have to fluctuate as well if you recall.
We did over last year, we were able to accrue or some payroll taxes because of the cares Act and so we do have a payment of $3 million due at the end of next year. It didn't do in December.
On that as well if that doesn't change from a regulation perspective, so we're going to see what from the cash flow you've got income coming in.
Got it but if you hit your guidance it sounds like we can still be negative free cash flow for the year just based on not all of the working capital unwinding.
Yes, if you look at I mean, we have if you take the results that we need to do to get to that EBITDA of the 2023% to $25 million.
That will go to the bottom line from a cash flow perspective.
And then you have the working capital adjustment.
Got it okay.
And then I think you guys said on the call you expect about 150 basis points of gross margin improvement. This year was that for the overall company or for construction.
Alright, sorry, TCR construction.
Yes, that's most likely for the GC or piece of it too.
Exit to hit our total number youre going to see an input improvement in our overall.
Gross margin.
Got it okay.
And then on the OTR side.
So for the last three years I think you guys have grown that at around 10% a year.
In the first half you guys grew at around 6% year over year and you guys highlighted.
A lot of uncertainties in the back half with with the Delta I mean, what's the thought process for guiding the 25% year over year growth for this segment.
And then it.
It doesn't that doesn't sound like you have a lot of visibility into it so why guide that aggressively for that segment.
And actually from a sales perspective.
While the <unk> portion, which we stated is pretty much got sold for the year were there and anything we add the <unk> sales if we choose to do that would be accretive.
Look at the OTR component, we're just about there too here sitting in July sales continue to improve.
And when.
When you take a look at what we've sold.
The trend of sales and the pipeline tied to our maintenance space and the traditional pull through we get pull through actually has increased nicely here.
We're able to project out the year and see the nice growth trends coming through so the growth is there based on the sales that we have and project backlog for owner direct.
The maintenance space has continued to grow in terms of.
Sales the sales have actually been very good and also you've got the pull through that's just coming through with that pent up demand. So it's actually we're pretty pretty pumped up about where the <unk> going and the growth factors are there.
We also added a lot more people to staff here over the past year right. So we've really pulled back last year, but this year, we did put on more management and sales staff in the OTR earlier in the year and again, we're going to continue to invest.
Right at the 22 to not stop the growth readjust.
We just see so much opportunity.
Right.
Yeah, I mean, it just seems like given given the history with the company.
Not not being very consistent in achieving its guidance. It just seems a little aggressive to guide for 25% growth given the first half of the year, but.
Hopefully you guys had it.
And then the last question I have is.
I know you talked about this being a transition year it seems like.
Theres been a lot of transition year since you guys came public in 2016.
I think theres, a little bit of just.
I challenge the relationship between the company in general and public market investors and I guess is the question to you Charlie.
I mean, I'm trying to understand the hesitancy of engaging with our investors about your potential new born addition, it would just be such an easy way to restore credibility with investors and public markets. So it is really trying to understand the hesitancy of engaging with.
Just the investors as you guys are making that decision about board members.
Sure Erin.
One of the things that.
I'm really pleased with actually is our nominating and governance committee, that's running our search for our new member there's been some good conversation between management and the committee. The committee is wanting to search and one of the things that we highlighted was the issue of our strategic plan and the importance of finding incredible candidates that can help us drive.
All the things we've laid out from a growth perspective, including organic as well as acquisition.
And they've done a I think a great job of producing some real stellar candidates, they're working it aggressively I think our chairman has done a really smart job of thinking through all the.
Constituents out there and.
He's got a heck of a nice pipeline of candidates.
So they're still working through the process.
That's.
Probably as far as I'll go with the update right now.
Yeah, I would just say what you guys think is important and what your shareholders thing is important there.
There might be some some overlap, but there might be some overlap and I think engaging with shareholders at a healthy dialogue to have.
Especially given the history you guys have over the last five years.
What you guys think might be there I candidate might not necessarily be what public market investors and.
Sir your partners at the end of the day, though.
I think it's just a very easy way to help restore credibility with our investors.
And it blows my mind that that the committee is choosing not to take that action, but.
Hopefully they change path on that thanks for the time.
At the end of macro.
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Our next question is from Mike Hughes of <unk> Capital. Please proceed with your question.
Yes, actually I wanted to follow up on the last caller's question.
On the 25% growth for the OTR segment I believe that segment was recast from you previously referred to it as services. So that that line item did about $127 million in revenue last year and if it grew 25% this year you'd get to a little less than 160 million.
Year to date, you've done $62 million, so that implies a run rate in the back half of $48.5 million a quarter.
It would be up from $33.5 million you just did so.
Have you ever had that magnitude of a step up going from $33.5 million quarterly run rate of $48.5 million.
Yes, it's obviously quite a bit of growth.
And thanks for the question.
When you look at our SG&A numbers, two you'll see that we've invested in the OTR segment and that includes both management oversight as well as additional resources out in the field. So we're prepared for it we've been working it hard and this has been our core growth strategy.
Last year, we backed off a bit because of what was going on around us.
But this year once we saw things we're opening up we went and made the further investment to expand it. So the sales are coming in.
We had a nice jump in sales in Q2.
And there is visibility on that continuing the nice thing is the.
The beauty of that sector or segment, rather you got your maintenance space and that's the part that youre in with the customer.
Needs they call us up and there's pent up demand, where they held off last year is just emerging they need to change our cooling towers chillers and air handlers all of that equipment. Eventually expires, we're has to be rebuilt.
And that's where we come into play so our contract base keeps growing that's the.
Preventative maintenance space and then you have what's the traditional pull through that comes through those relationships. That's fueling the growth along with working with different customers I'd mentioned.
Last call and this call what we did at Nashville.
What we're working there is selling to our customer base. The health care customers are direct services. So how we can help them with their <unk>.
Maintenance larger capital programs.
We can actually do the work direct they don't need to hire a general contractor, we can actually do that work for them and then I also mentioned in today's.
Prepared remarks, we've introduced new services to those customers call program management services and Thats, where.
Customers typically hire an architect and engineer to come in and do some analysis work for their needs.
But the reality is they don't really understand mechanical electrical plumbing the way, we do and we went through our customers last year. We started to ask questions would that be of value to you. If we were able to combine all of our knowledge of MEP installation with that front end engineering program management to help you make better informed decisions.
And there was a resounding, yes, we would love to have that so we went into the market. We found the vice president that we've retained he's sitting in Nashville.
It's.
We've already secured some nice program management related work through his endeavors. So we're very excited about that and all of that's quick hit and it's not like you've got months to go before you start a big project actually get awarded to do it. So all of that is fueling the pent up demand the new services the focus on health care expansion.
And even indoor agriculture.
A lot of that work is going on to direct so it's pretty exciting what's in front of US I think we're hitting all the right levers.
That segment the revenue was $20.5 million in the first quarter you just did 33 five.
But to ramp to $48.5 million a quarter, which is exactly what the guidance implies actually say in excess of 25%. So mathematically it might even be north of that.
Maybe to give us more comfort what was the revenue run rate in that business in the month of July were you out of 15 or $16 million revenue run rate in July.
We're not going to comment on.
Comment on the July numbers, just yet but from the standpoint of increase we have the visibility based on the backlog. So the ramp up is there again, it's work that we have.
And then we'll work we're selling today will earn in Q4. So it's the work we've already sold.
You saw the sales ramp up in Q2 that work is now being burnt in Q3, plus you have the maintenance space and all the other things we already have in backlog. So you can see how that's ramping up again, we sold $38 million in Q2, which you can see how you add in the other existing things we already have in the business. He got maintenance space you could see how you can.
North of 40 and approaching 50.
Okay. Okay, and then just just to follow up on the prior <unk>.
Question about just the sustainability. So how much of this is just work that was pushed out so the business jet.
Generate $45 million to $50 million in quarterly revenue for the September December quarter, and then it bleeds off and we're back to the 30% to $35 million level by the middle of next year, how do you see that playing out because that could that happen.
Look I do think the pent up demand right. There's a catch up of hearing your auto dealers are saying there what's it going to be full again at the full 22, so kind of the same thing things choked, a little bit because of it.
Demick, we're catching up with that but the other thing. We're doing again is we're investing in additional sales resources to get new customers.
One of our one of our big customers as Disney.
And we're having active conversations with them I was actually at Epcot two weeks ago for a management meeting, we actually had our meeting right Disney we're.
We're doing quite a bit of work there.
<unk>.
There is just.
<unk> was packed and I just saw the earnings data just released them I read earlier this morning Disney's results and.
While they havent committed that their capex is going to be increasing clearly we know what they want to do with the parks.
Intuit too to the Disney.
In terms of future project work.
To close we'll close it out they will just add the trends we think the spend is going to increase.
As their parks continue to do well so its I.
I think we're going to see the pent up demand probably catch up but I also think everything else. We're doing with investments will allow that growth to continue its a big focus Mike.
<unk> revenue the margins, it's generating it's clearly the right answer for our company.
Okay, and then I appreciate that Youre kind of tightening up the proposal process, where the on only honor of proposal four.
You said as short as a five day time frame.
Yes, my concern on that front would be.
We've probably had more inflation than anyone expected six months ago, and just the nature of your business, what you've booked into backlog six months ago, maybe starts to flow through into revenue in the back half of this year.
And the cost component probably is higher than you envisioned at that point, so give us some comfort on why that would not be the case.
A couple of things one as we were looking at our business plan last year, we actually had our GC or segment pretty much sold we sold some things in Q4 into Q1, but we didn't need a lot of sales during that period, because we had the year really progressing nicely. So the nice thing is.
We didn't have to sell stuff and they get bit going into the new year, where maybe commodity prices would have hurt us so theres a little bit of that that happened.
I think we're fortunate that we didn't have to sell a lot. So as a result, the new sales, we're getting right now and we did have a very good booking in Q2.
We were well aware of what we were looking at in terms of the <unk>.
Steel coil steel pricing copper pricing and obviously the equipment, we look to walk into your equipment with our proposals so.
We are in decent shape, but there could be here and there we could see some elements of that are hurting us, but as we said so far we've been able to mitigate those those increases.
In the first half of the year like.
Mike do you have anything else to share.
Sure I think if you look at work I think your question related to last six months of sales. So one of the things that we.
We have limited the timeline and our proposals. We've also had this strategic conversation with our customers that you have to procure immediately.
And whether thats stewards of that material, whether its decisions that need to be made we've been keyed in on that early conversation where.
In the past when we went through these periods of times.
The procurement would take months after that so its immediate procurement and I think the limiting of the days on the number of proposal has been received positively from our customers because that also heightened them to understand that there is an important decisions have to be made so pushing the decision making process, both internally and really most important X internally from our <unk>.
Customers is really what we've done, especially in the last six months to make sure that everybody is aware of the fluctuation of potential fluctuation.
Yeah.
Okay. Thank you for your time.
Thanks, Mike.
This concludes our question and answer session I would like to turn the call back to CEO, Charlie Bacon for closing remarks.
Well. Thank you everyone for joining us today, we look forward to speaking with you again, when we report the third quarter results in November.
Again for your interest in La Buck all the best.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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