Greetings. And welcome to the Limbach Holdings Q4 Full Year 2019 Earnings Conference. 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, today’s conference is being recorded. It is now my pleasure to introduce 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 announced its 2019 fourth quarter results and filed its Form 10-K for the fiscal year ended December 31, 2019. Today, the Company will be reviewing those results and providing an update on current market conditions. The Company may also refer to a slide presentation accompanying this earnings this call. The presentation can be found in the Investors section of the Company website at www.limbachinc.com. The Company encourages everyone to review the forward-looking statement disclosure on slide 2 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. Please go ahead, Charlie.

Thank you, Jeremy. And good morning, everyone, and thanks for joining us. We will be addressing the 2019 financial, operating results later in the call, but first I want to comment on current market conditions, and then ask Jayme to address a number of related issues that will have critical importance to all the Company’s stakeholders, including employees, investors, balance sheet partners, self contractors and vendors. More than eight weeks have passed since the onset of the COVID-19 began to widely impact our economy, our industry, our communities and the Company. There has been no shortage of challenges, triumphs and difficult decisions, and it’s hard for me to accurately describe the dedication, focus and commitment of our employees over these past weeks. It’s been humbling as an experience that has made all of us very proud here at Limbach. We’re a stronger company today for having been tested as it has been since the middle of March. I’d like to applaud our employees for their effort in pursuing the three critical priorities enacted in response to the pandemic: Stay safe; get cash; get work. We can not lose sight of these objectives as the operating environment continues to evolve and hopefully improves, even as we pivot to the future and executing our immediate and long-term strategic objectives. The Company’s commitment to safety of our employees and their commitment to each other has been deeply ingrained in Limbach culture for decades. We will not deviate from that commitment. The team’s ability to source and distribute personal protection equipment, modify workplace to accommodate social distancing and otherwise react to this new reality has been impressive. We are of course grateful that among our ranks, we’re aware of only a limited number of colleagues with direct exposure to the virus. All afflicted employees…

So, those are top priorities since the beginning of the year, and in particular over the last two months had been to maximize liquidity and to improve working capital management. The effort extends beyond the corporate or branch finance teams to local project managers and everyone else with the customer interface, and the results have been impressive as you can see on slide 5. It has been a great team effort. With more aggressive and consistent invoicing, billing and collections, as well as the conversion of unapproved change orders, the Company’s liquidity position has actually improved since year-end with minimal concessions from vendors. This March 16th, the average daily cash balance has been just more than $15 million and the average daily revolver draw has been less than $600,000. As a reminder, our total revolving loan commitment is $14 million, and our most recent borrowing base provides the full access to that commitment, net of outstanding letters of credit of approximately $3.5 million. This ultimately provides for approximately $10.5 million of availability. So, as of April 30th, the sum of cash on hand and the undrawn availability under the revolver was $23.5 million, as compared to $19 million as of December 31st and only $10.6 million as of September 30th. At this time, we have not seen any slowdown in collections and have not identified any new credit risk among our customer base. And as a reminder, we have virtually no credit exposure to the energy, restaurant or retail sectors, and minimal exposure to small commercial landlords. Beyond more aggressive working capital management, we have also executed a significant cost reduction initiative and we estimate this initiative will generate ongoing cash savings throughout the remainder of the year. These cost reductions include temporary salary and benefit reductions for senior leadership…

Before we pivot to recap 2019, I want to address the ongoing process of resolving claims and change orders, principally in the Mid-Atlantic and Southern California markets. We’ve always expected to communicate it that this was a process and with ebb and flow based on the often unpredictable pace of informal negotiations between principles, and more formal dispute resolution procedures. We’ve been working these opportunities aggressively, notwithstanding the broader market environment, and we continue to believe in the merits of our positions and the suitability of our carrying values, which we’ve had to support without order. As a reminder, these values are reflected on the balance sheet at a discount to the amounts we are seeking and believe we are entitled to. Previously, we had anticipated a resolution of certain disputed items in the first half of this year. We are continuing to work toward that goal but remain cognizant of the complications or distractions presented by COVID-19, and expect the current discussions may not result in final resolutions and payments in the next 60 days. At this point, let’s turn to 2019.

Let me first start by commenting on the 2019 audit, which is my first since joining Limbach on October 1st. From a technical accounting perspective, this year’s audit went smoothly, but ultimately complicated the Form 10-K filing process and required the Company to take advantage of the filing extension provided by the SEC with respect to the potential impact of COVID-19 on our financial forecast, and whether or not we believe we can meet the future financial covenants set forth in our loan agreements. In the last weeks of March and early weeks April, events were moving very quickly and circumstances were changing by the day. Each stand of economic disclosure, government announcement or consulting study about the state of the economy generated a modification to the Company’s forecast. It wasn’t until the situation began to stabilize in mid to late April that we were able to get ourselves and the auditors comfortable with our financial projections. None of these delays, however, related to an accounting or controls issue, or any unresolved disagreement between the Company and its auditors. We have also taken advantage of filing extension provided by the SEC for our first quarter Form 10-Q, so that the Company can continue to analyze the future impacts COVID-19 could have on the Company. However, after our first quarter filing, it means our goal to accelerate the quarterly and annual closing process and to file our SEC statements within the standard reporting deadlines. At this point, I’d like to recap 2019, which is summarized on slide 7 to 10 of the presentation. In 2019, the business demonstrated modest growth in consolidated revenue of 1.2%, as compared to the prior year. Construction revenue was essentially flat year-over-year, which was the result of a concerted effort to manage new project sales in…

Let me further address the LAX Midfield situation. This has been a challenging project for everyone on site. Many of the contractors have been impacted in various ways and are also pursuing remedies to get paid on impact claims. We have faced numerous delays on the project, which was caused by other situations, basically by others, and that impacted our ability to redeem our original budgets. We continue to have discussions with our customer and have made some progress. We will continue to take the appropriate actions to maximize our recovery. However, we don’t expect there to be a quick resolution. As Jayme noted a minute ago, the majority of the actual work on site will be substantially complete in late June with the remaining work being started and commissioning of the install systems into Q3. So, as we look forward, here’s what I’d like to share: First, we finished 2019 with backlog of $561.2 million, which provides revenue visibility for the current year, notwithstanding COVID-19-related project impacts. We’ve already seen and continue to expect that certain projects will experience delays, and that will impact our ability to bill and recognize certain revenue this year. Those projects will get pushed to the right. We have no evidence that suggest that these delays will become cancellations, nor that any meaningful portion of the year-end backlog will be canceled outright. While anything is possible, that has not been our experience in past episodes of market stress. We’re also carrying meaningful amount of work in backlog that was not scheduled to have been built this year anyway. We expect some of the backlog would be converted to revenue in 2021 and small portion into 2022. We do expect further the slowdown in new major project opportunities. To be clear, we’re proposing on work…

Thank you. The floor is now open for questions. [Operator Instructions] Our first question is coming from Brent Thielman of D. A. Davidson. Please go ahead.

I just wanted to clarify that work in Southern California that that should be completely done in the third quarter. Is that right?

That’s correct, Brent.

Okay.

We are ramping up -- we’re wrapping up the construction during this month of June and then we’ll have some commissioning work to do, post the substantial completion, and we expect to complete that by the end of the third quarter.

Okay, great. And I guess, I heard from others in the in the industry, the services piece has been pretty materially impact, just difficulties getting people in and out of buildings and facilities just for additional precautions. Is that what you’re seeing today as well, Charlie?

Brent, we’ve seen -- yes, we have been impacted. We’ve seen some of that. But, what was interesting about how we approached this? In early March, we started having daily calls with our senior management team, and I presented three key areas of focus: Stay safe; get cash; get work. And we had daily calls around that. On the get-work part, it was amazing what we saw happen. We rallied around entire sales team, first to reach out to all of our customers to tell them we’re open, we’re ready to service you, we’re an essential business, we’ll help you any way we can. And then, we really started tooling up with some innovative ideas, including, we came up with a concept of converting hotels into acute care patient facilities. And I actually sent that to the White House. On a Friday, they received it, over the weekend, the Army Corps of Engineers must have received it and they announced on Tuesday, the following week, that this would be a great idea if we need it. I’m happy to report, we didn’t do any of that work and I think that’s good for society. We also went on to create something called virtual tech. And the virtual tech, we launched -- we actually were using it, and it’s basically where we don’t have to go into a building, but we use things like basic, Zoom or other services, but it’s called X or Y technology, where we have our technician in our building and we’re actually connecting with the building engineer in the building and explaining to them what they need to do to take care of a problem. And we charge a service fee for that. And we’re pretty excited about that. We think that virtual tech is really…

Okay. That’s good. I guess, another question, Charlie, would just be, I think about your regions, and unfortunately they’re sort of in these areas that have been hotbed for the virus. Is there a way to couch sort of how much of your business has been -- as a percentage of the Company, how much of the business has been materially impacted here in terms of delays and being able to actually execute work? Is it 50%, 60%? And then, I guess, the follow-up to that would be that have you or are you considering taking any sort of contingencies, impacted projects? I understand that it’s a matter of a couple of weeks. Yes. That’s one thing, we were delayed, but if it is indeed longer, do you consider taking charges today, sort of a conservative step, should those delays get extended?

So, Brent, on the first part, where we really hit the wall was in Boston. Namely in the cities of Boston and Cambridge, we had a couple of projects going. Interestingly enough, we have a ton of prefabrication on those projects. So, while the actual construction sites shut down, we actually brought more people back into our production facility and really got ahead on prefabrication. So, once those sites open back up, we think we’re going to be even more productive in the field, because less field assembly, more prefab always helps us with reducing labor costs. So, we actually, I think smartly executed what we could including -- we’ve got some other couple of major projects that we’re just starting up the planning aspect, meaning where we do the building information modeling, we continued with that. That did not stop. So, while physical construction of the field, yes, there’s going to be an impact there on revenue up in Boston. We actually still continue to see some revenue come in off the prefab as well as the planning. The other markets that we took some hits on in Michigan, we had a similar situation. But, we’re very busy up in Michigan. And we did exactly the same thing. Planning and prefabrication just really became the focus. And our customers were very supportive of that. And also in Michigan, there were some projects that were deemed essential and they were allowed by the state of Michigan to open back up, namely the healthcare projects that we’re building. On kind of putting a percentage on the impact of that, I’m not really able to say it’s an exact amount just yet. I think, we’re still digesting that. But, it’s mainly those two locations. The rest of our markets pretty much continued. We did see some pullback initiatives. We did see some pull back, like couple of customers, specific customers that pulled back just because they were concerned about the virus, and they told us, let’s shut our projects down for the time being, let’s get organized and we’ll start back up in the future. But, again, we’ve seen some other business come in that’s all set a bit of that. So it’s kind of been an interesting environment. On the contingency or taking a charge if this continues, when we looked at our forecast -- we’re looking at our forecast each month, we’re kind of putting in some contingency in those numbers to kind of attribute -- put these levels…

Yes. for productivity, we actually have a team that’s working with the branches that are trying to -- it’s kind of hard to capture really the time its taking extra washing of hands or maybe taking the stairs, not the elevator. So, we have a team that’s working through that right now with our branches on every specific project to try and capture what is truly that impact.

We also -- the team, which has several people, they’re talking to each of the branches once a week, making sure we’re properly noticing our customers by our contract terms to recoup impact expenses. So, I think we’re handling Service smartly.

Okay. And I guess, just last question real quickly. I mean, in terms of your market segments and the backlog today, I think not all non-res contribute equally and whatever is coming, who knows what’s coming. But, office those sectors, I think hospitality sectors, I think there’s some worry around those specifically, maybe what percentage of the backlog is that today versus general healthcare, some of the data center work you’ve been doing, Charlie, things like that that might be a little more resilient?

Yes. I think we’re fortunate that we have very little in backlog in terms of kind of commercial type space. We don’t do a lot of that. A lot of what the company does in the commercial market is it’s a material fit out work, it’s get in and get out. There’s no major big office buildings, or anything like that. We are doing some work up at Michigan for Bedrock, but that’s still progressing. So, at this point, we’re not seeing any -- we’re not really overly concerned about our backlog. It’s good, strong backlog with, quite frankly, I think segments that aren’t going to be dramatically impacted by a pullback. Now, I’ll comment just -- I think, we’ve done a really strong job at kind of a tactical execution of dealing with the virus. But during this period, once we saw that we were stabilizing what we needed to execute, and I think we executed extremely smartly back in March, made the cuts we had to make. We moved quickly. But, when we saw the window of opportunity, the senior manager team actually have had three virtual offsite sessions talking about post the virus crisis and when things start to stabilize, where do we focus? So, we’re continuing our -- or I should say, we’re going to be accelerating our owner-direct push, which has been part of our strategic plan for several years. But, we’re going to accelerate that and we’ll be talking more about that on our next call. But, when you look at sectors that we believe will be healthy coming out of this, includes healthcare, and we’re already seeing some reprogramming going on in existing facilities, in case the virus comes back in the fall or just a resurgence of it. R&D facilities, mainly biotech…

Very much. So, I appreciate you taking the questions. Thank you, guys. And best of luck.

Thanks, Brent

[Operator instructions] Our next question is coming from Gerry Sweeney of ROTH Capital. Please go ahead.

Just to follow up a little bit more on what you were just discussing with Brent, and maybe from a different tack. Looking at maybe utilization, right? So, a lot of projects are ongoing out there. There’s probably different rules put in place in different markets, but, just generally, your social distancing space and et cetera on projects. Do you have any idea what may be the utilization rate is of assets out in the field or manpower on projects today versus maybe pre-COVID? And do you have the ability to sort of flex up that manpower to manage some of that most likely lower utilization?

Gerry, what’s interesting about what just happened, in previous calls, I think everybody knows, we’ve been very concerned about human capital assets, not having enough of them, and that caused us some problems in the past. This is causing -- and we already pulled back in Mid-Atlantic, we slowed down our business; Southern California, we slowed down our business to catch our breath and get back on track. But right now, I think, the overall industry is going to be able to catch its breath and really look at the deployment of assets differently. I think, the slowdown is going to be beneficial to the industry. I think, there’ll be improved execution by just really channeling the human capital appropriately. And the slowdown of the construction market, I think right now will allow the general contractors to have better teams on their projects and the likes of specialty contractors like Limbach to also deploy our assets appropriately and quite frankly see a better margin production come out of it. So, I’m not sure if I’m fully answering your question. But…

Yes. I was actually looking at from a perspective of let’s just say a pre-COVID, like a normal project had 100 people on it; post-COVID, just because of social distancing, is it like 80, you have 25% less people, staggered shifts and can you sort of flex your workforce to meet? You don’t want to be carrying a 100 people on that project when only maybe 75 or 80 could be on a project at a given time. That’s sort of what I was getting at. It almost elongates your backlog as well because maybe some projects take longer, et cetera. So, I’m just trying to figure out the puts and takes on that front, if that makes?

Gerry, I had a call last week with a customer and one of our major customers, the CEO called me up one day to have a chat about our sort of processes, and this happens to be in the Michigan market, as he ramps up his projects again, now that Michigan started to give us a green light of how are we going to approach it? So, we talked about the issue of social distance and things like a buck hoist, the big hoist that are on the outsides of buildings. You can only have a couple of people in them versus say 15. So, the idea of your perhaps staggered shifts to start rolling in the morning, you wrap up in the afternoon, and you got the second shift come in the afternoon and obviously the summer hours with more daylight. That’s fantastic. We can execute that. I think, what we’re all going to have to do is kind of continue studying what’s going on. We’re going to have another call here in several weeks, Gerry, with the Q1 results. Our team that’s working on protecting us in terms of making sure we’re noticing our customers about impacts, they’re also doing the data analytics study on what is this truly, how’s it impacting us? I think, we’ll have more information for the next call, Gerry. And I’ll remember this question and I’ll perhaps better give response to it.

Yes. We also built 12-month manpower schedules that we lay out. So, that’s part of what all the branches are looking and anticipating of how that impacts, the manpower outlook for those schedules and how we lay out the number of people on jobs.

[Operator Instructions] At this time, I’d like to turn the floor back over to management for any closing comments.

I just want to thank everybody for joining us today. We look forward to having anther call here in the very near future for the Q1 results, and we’ll speak with you then. Thank you.

Ladies and gentlemen, thank you for your participation. This concludes today’s event. You may disconnect your lines or log off the webcast at this time. And have a wonderful day.