Limbach Holdings, Inc. (LMB) Q4 2018 Earnings Report, Transcript and Summary

Greetings. Welcome to the Limbach Holdings Fourth Quarter and Full Year 2018 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Jeremy Hellman with the – of The Equity Group. Thank you. You may begin.

Thank you very much, and good morning everyone. Yesterday, Limbach Holdings issued the announcement of its 2018 fourth quarter and year-end financial results and filed its Form 10-K. The company will also be using a slide presentation to accompany this earnings 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'd like to turn the call over to Charlie Bacon, CEO of Limbach Holdings. Please go ahead, Charlie.

Thank you, Jeremy, and good morning to all. Welcome everyone, and thanks for joining us. Joining me today is our Chief Financial Officer, John Jordan. As Jeremy mentioned, we'll be using the presentation deck and we'll note the pages we are on. I'll be starting-off providing my executive summary, high-level business comments and highlighting several key initiatives. John will be providing detailed financial performance information. I'll come back after John's comments to provide our views of the market conditions and an initiative we're taking on around advanced prefabrication to deal with the pressing labor conditions. Slide 3 summarizes our agenda for our prepared remarks and we'll follow those with a question-and-answer period. Turning to slide 4. Starting with Q4, we had a terrific quarter, both the Construction and Service segments performed well with sales, revenue and operating income. The quarter was led by year-on-year revenue growth of 15.2% with EPS coming in at $0.44 per share, one of our strongest quarters. We are pleased with the results. Construction sales during the quarter were strong with both actual bookings at the backlog, including four significant health care projects and several new projects entering pre-construction that we referred to as promised projects, wrapped up the quarter with record backlog of $559.7 million, and had an additional $380 million of promised work that we plan to bring into formal backlog as those contract terms are finalized. Our Construction pipeline remains strong. I want to note, we were [targeting] [ph] sales through our available human capital resources, leveraging the talent we maintain in this heated construction market. We're very focused on controlling growth while maximizing gross margin. We continue to see improved margins and we don't see that letting up in the near-term. Please turn to slide 5. Our Service segment continues to perform extremely well. The momentum of our Service expansion is exceeding our expectations and we expect that momentum to continue to build. Q4 was another terrific quarter for Service by all measures. To remind everyone, we launched our rapid service growth platform back in 2013, where we delivered revenue of $39.9 million within that segment. 2018 our organic growth exceeded $108 million. Our maintenance base grew to just under $15 million after another solid year of sales. Our Service projects also had a record year and our customers continued to retrofit their buildings with equipment upgrades. We also realized continued expansion of our building automation systems or BAS with 9 of our 10 business units now providing the service. Installing the BAS typically leads to a maintenance contract, which leads to even more Service pull-through revenue. Staying with our Service segment, we clearly see substantial growth opportunities with this higher-margin offering, which is less inherent risk when compared to our Construction services. We mentioned in our Q3 call that we launched a new energy monitoring offering known as LEAP or Limbach Energy Assessment for Performance program, which is summarized on slide 6. This offering allows building owners to optimize their use of energy and water. We're also piloting a software application to assist our Service customer base with equipment-predictive analytics helping the building-owners optimize the performance of their building mechanical equipment. Between our brands, our ongoing organic investments in human capital and now these AI platforms we expect the Service side of our business to continue its rapid growth. Back to our results for 2018, 7 of our 10 business units delivered outstanding results. Two of the units came up short due to Construction project delays, which impacted their anticipated revenue and bottom line results. Our Mid-Atlantic unit did severely impact us in 2018, due to the labor shortage and several significant project delays. Our turnaround plan for that business unit was assembled in Q4 and we're pleased to report the plan is on track. We've installed new leadership. We focused on sales to be in line with our capacity to deliver and we're leveraging our local and company-wide strengths. Craft manpower in that business unit has returned to more normalized levels. During the fourth quarter, we successfully closed out one of the problem projects the D.C. United soccer stadium, which was completed last summer. The closeout of that project led to a financial outcome that was better than anticipated. We have several other projects in Mid-Atlantic that were delayed or impacted by others and we continue to pursue financial recovery. I'm now on slide 7. When removing the Mid-Atlantic losses from the overall picture of the company, we delivered strong gross margins of 15.2%. That compares favorably versus the 13.5% gross margin we delivered in 2017. As we've been saying for some time, the margin trends underpinning our business are positive and we're happy to see the balance of our business performing as or better than expected. For the full year, we incurred $16 million in net write-downs resulting in adjusted EBITDA of just about $9 million. Absent the write-downs, our adjusted EBITDA would have compared very favorably versus our 2017 results of $16.7 million. I want to comment on the broader impact of the business from the Mid-Atlantic experience. We're deliberately scaling back that unit's business as we focus on its profitability. Absent that strategic decision, we expect our overall company growth to continue. One of the things that I take great pride in is working with the executive team and many others at various levels within the business stepping back and coming up with smart plans to allow our business to evolve. The negative impact of the Mid-Atlantic 2018 results has been turned to a positive that will improve our controls and future results. On slide 8, we recap actions already undertaken to strengthen our Construction operations to support our anticipated growth along with other key initiatives. Number one, we promoted another senior executive to provide oversight of the operations of the business. In addition to our existing Chief Operating Officer, Kris Thorne, Michael McCann was promoted to co-COO. The business units are evenly split between them allowing for better oversight. This move also built in capacity for future growth in terms of quantity of reporting business units. Number two, we installed additional operational support for the COOs for operational audit and to assist them with the development of acquired operational talent from direct hires and acquired companies. Number three, we're focused on labor capacity to successfully deliver our contracted work. Each month all business units are projecting their craft labor requirements, keeping sales aligned with the capacity to successfully deliver. Number four, we installed a new Vice President to oversee the constant improvement of our policy and processes along with developing more timely scorecards around our key metrics for more timely data to be in the hands of our managers at the project management and field foreman levels. Concerning other strategic initiatives, we mentioned on our previous calls, we secured a significant data center project in 2018 and we developed a business plan for further expansion. Walking before we run, we wanted to deliver success on this first large-scale data center project, learn from the experience, confirm our business plan and move forward for further expansion. Our first project has gone extremely well. We did learn quite a bit and we're applying those lessons learned. We are pleased to announce that we've been awarded another significant phase of a project we first secured. We are now commencing our additional investment to expand this new market sector. Our core management philosophy of Limbach is appropriate diversification of service offerings, geographic footprint and market sectors while never having a heavy concentration in any one customer. Large data centers were missing from our portfolio of market sectors. That is no longer the case. We did announce this past Friday we secured new financing for the company. This new $80 million package paid off our existing bridge loan and term debt, provided a facility for working capital needs and also provided us capital for acquisitions. John will provide more details in a moment on the facility. Concerning acquisitions, we continue to remain proactive with opportunities that meet our criteria with a key one being any acquisition deal we present will be accretive to our bottom line. Now let me turn this over to John for more details on the financial performance and our new financing. I will come back with comments on 2019, my views of the market conditions and introduce development of a new plan to reduce dependency of field labor. John?

Thanks, Charlie. Moving to slide 9, starting with the fourth quarter results, our revenues were up 15.2% to $151.4 million. Construction segment revenues of $118.3 million were up 9.6%, while Service segment revenues of $33.1 million were up 40.7%. Fourth quarter gross margin came in at 13%, which was down from 15.9% last year. The fourth quarter 2017 was a very strong quarter with significant upside recognized. As Charlie noted, we've closed out the D.C. United project and craft labor levels have returned to normal in Mid-Atlantic, so we're optimistic that we are moving past the write-down issues from 2018. D.C. United settlement is reflected in the 2018 results, although, the cash was not collected until 2019. We continue to pursue recovery of approximately $18.5 million of change orders and claims in Mid-Atlantic. We expect some of these to settle on and be collected in 2019 and some will carry over into 2020. SG&A expense in the fourth quarter was $14.4 million. That was down approximately $700,000 from a year ago as we recognized less incentive expense and reduced our outside professional fees. As a percentage of revenue, SG&A was 9.5% in the fourth quarter of 2018 versus 11.5% in the prior period. Net income for the fourth quarter was $3.4 million, or $0.44 per diluted share. That was up nicely from $1 million or $0.12 per diluted share a year ago. For the full year revenues grew 12.5% to $546.5 million. Growth was balanced as our construction revenues grew 12% to $438.2 million and service grew 14.8% to a segment record of $108.3 million. Full year gross margin was 10.9%, down from 13.5% in 2017. Gross margin in 2018 was negatively impacted by the net write-down to $16 million. As I noted a minute ago, we saw a very nice improvement in the fourth quarter in terms of conditions returning to normal in the Mid-Atlantic branch. As we continue to progress to closeout those projects and the other branches perform at normal levels, we are optimistic that gross margins will improve substantially in 2019. Our SG&A expense in 2018 was $57.1 million compared to $56 million in 2017. As a percent of revenue, SG&A came in at 10.4% versus 11.5% in the prior year. Notable year-over-year variances in SG&A came in the form of increased salary and benefit expense as we added staff, offset by reductions in incentive compensation expense and professional fees. Due to the write-downs in Mid-Atlantic, net loss for the year was $4 million or $0.52 per diluted share, compared to a loss of $900,000 or $0.13 per diluted share in 2017. As Charlie noted earlier, excluding Mid-Atlantic branch, the balance of our business had a solid year. Moving to the results from Mid-Atlantic and its entirety, our revenues would have been $440.8 million, compared to $381.6 million in 2017 for a gain of 15.5%. 2018 gross margins excluding Mid-Atlantic would have been 15.2%. That compares favorably versus our 2017 result of 14.2% excluding Mid-Atlantic and is in line with the plan and our expectations going forward. Certainly, if we exclude Mid-Atlantic from our adjusted EBITDA figure, our 2018 results would have been $25.2 million. That would have compared favorably versus our original guidance for the year of $20 million to $24 million. Looking at our segments starting on slide 10. Top line revenues in our construction segment for both the fourth quarter and full year were strong, with growth at 15.2% and 12% respectively. Construction segment gross margin in the fourth quarter was 11% which was down from 13.4% in the prior period. Full year construction gross margin was 8.4% compared to 11.4% in 2017, again due to the Mid-Atlantic issues that we have discussed. Without Mid-Atlantic, construction gross margin for the year would have been 11.6%. Turning to service on slide 11. All aspects of the segment continued to perform well. We close the year with great momentum, as fourth quarter revenues rose 40.7% to $33.1 million. For the full year 2018, service revenues created a $100 million mark and ended at $108.3 million, which is up 14.8% from the prior year. We ended the quarter with service segment backlog of $54.2 million, up from 100 -- I'm sorry, up from $51.7 million in the third quarter and we expect all of that to flow into 2019 revenue. Our service segment continues to fire on all cylinders and its part of our operations as we intend to emphasize even more going forward, as it helps us de-risk the overall business. 2018 was a very good year in terms of sales leading to a record year-end backlog of $559.7 million, which we show on slide 12. Of that $54.2 million was service work, which I just noted, with $505.5 million of construction backlog. That construction backlog provides approximately 60% coverage relative to our 2019 construction revenue budget, so we're starting the year in a very healthy position as well as revenue coverage. In addition, as Charlie highlighted, we have got -- we have had some nice wins in the healthcare vertical already in 2019, along with the next phase of a large data center project. As a result, our promised work level sits at approximately $380 million. Coupled with our booked backlog, our total project queue is approaching $1 billion. With the backlog and new sales included, we are in the process of reporting this in 2019. The overall expectation is modest top line growth, as we make strategic decisions related to the capacity of Mid-Atlantic and a few other branches. The focus of 2019 is improving the quantity and quality of the bottom line by improving execution and better managing growth. Moving on to our balance sheet on slide 13. Over the previous year, we have dedicated management time to improving our overall cash flow. This process starts with the sales effort and continues through collections. We're using very specific cash metrics at the project, branch and corporate levels to keep everyone focused on cash generation. Let's spend a little more time on the balance sheet as of year-end, but we'll focus more on the refinancing that we closed last week. The refinancing that we closed last week allowed us to classify a portion of the bank debt as long term as of December 31, as opposed to the current classification that was required at the end of the third quarter. As of year-end, we were $18.1 million net overbilled, which is a good indication of improved cash flow into the future. Getting to the details of our refinancing, the $65 million senior secured credit facility with Colbeck Capital consists of a $40 million term loan, fully drawn at closing and a $25 million delayed draw term loan, which will only be drawn for acquisition purposes. Both loans have a four-year maturity and bear interest at LIBOR plus 800. The proceeds from the $40 million term loan retired all the debt with a previous bank group, cash collateralized letters of credit, covered fees and provided approximately $2 million of cash for working capital purposes. The $15 million senior secured ABL revolving credit facility with Citizens Bank has a three-year maturity and bears interest at LIBOR plus an availability-based margin of 300 to 350 basis points. Of the $15 million, $1 million is reserved, so $14 million is available to be drawn. There is nothing drawn on the revolver at this time. The revolver will be used for working capital purposes and will collateralize with letters of credit mentioned above in order to free up that cash. We also issued warrants for the term loan lender, which could result in the issuance of 263,314 shares of the company's common stock at an exercise price of $7.63 per share. The warrants have a five-year term and are only executable upon withdrawal of the $25 million delayed draw term loan, which will only be used to fund an acquisition. Now to address a few key balance sheet items on a pro forma post-refinancing basis. Remember these are all unaudited figures. Cash is approximately $8 million with $14 million available under the revolver. Working capital is about $22.8 million, so about a $10 million improvement as to where we ended the year. Our total bank debt after refinancing is $40 million compared to $31.6 million at pre-closing. With that, I'll hand the call back to Charlie now.

Thank you, John. I'll close with a few thoughts highlighted on slide 14 before opening up the call to your questions. First, we were very disappointed with the impacts we occurred due to the Mid-Atlantic setback in 2018, but it's behind us. We've made several moves to stay on top of our growth going forward. We've strengthened our leadership team, we're focused on operational excellence within our Construction segment and we will continue to see rapid expansion with our Service segment. We believe we may have a game-changing service strategy with our new technology offering I commented on earlier and our entry into large-scale data centers has huge potential. Concerning going-forward market conditions, we don't see any let-up in opportunities. Slide 15 and 16 contain the summary of market data you're used to seeing us provide. The nonresidential segment of the construction industry is projected to have 2% to 5% growth in 2019. The various sectors that make up the nonresidential space have various growth rates and we believe we are in the right sectors. We tracked the AIA Billing Index, the Dodge Momentum Index and FMI who publishes quarterly forecast of the various sectors and all are pointing to continued expansion for the near to midterm. Our core management plus we are being diversified with multiple market sectors is something we expect will allow the company to continue its growth even in a construction down-cycle. We may have to shift resources from one sector to another, but that's the beauty of how you diverse business. I want to make the investment community aware of one other initiative within the company. We have set up a team to work on where Limbach can go with prefabrication beyond what we do today. I believe Limbach is one of the leaders in the industry, when it comes to advancing lean management techniques and modular construction. The team has been tasked with researching what our next chapter should look like. Modular construction is starting to take off. Craft manpower is in short supply. We need to figure out how to build our systems with less manpower. We believe the answer is through advanced modular MEP components. The team is expected to deliver a business plan in the fall for consideration of an investment in 2020. We will update the investment community later in the year with our going-forward plan. Concerning guidance for 2019 as John mentioned, we want to apply our recent sales in Q1 to our forecast for the year. We do expect to see modest top line growth with our scaling back of the Mid-Atlantic business unit, normalized gross profit margins and some modest increased SG&A with our continued investment to support our growth. We will release guidance for 2019 with our Q1 results which we expect to report in about four weeks. Operator, let's open it up for questions.

Thank you. [Operator Instructions] Our first question is from Brent Thielman with D. A. Davidson. Please proceed.

Thank you. Good morning.

Good morning.

Charlie or John on the overall outlook and I know more is to come, but sort of kind of top line growth for the year, you had a really strong year in services in 2018. You've grown the business 15% each of the last couple of years. I guess at this point, are you comfortable saying that can you or do you plan to try to sustain that pace for that business in 2019?

Yes, there's good visibility. When we look at the sales momentum that we had in 2018 into Q1, things remain strong and there doesn't seem to be any let up in opportunity in the marketplace. So the service segment, we expect that growth to continue.

Okay. And, obviously, I know you've taken a step back in terms of pursuing your work in the Mid-Atlantic. At what point do you get more comfortable in terms of starting to build that region's backlog again?

Yeah, sure. Good question. On Friday I actually went down there and I had lunch with the business unit leader a rather remarkable individual. He's been in place now for five months. He's done a great job at executing his turnaround plan, and he has absolutely stabilized the business. We're cleaning up the old stuff and just wrapping up a couple of more jobs and we're done with the historic problem jobs. When we sat and we talked about his going forward plan, it’s very focused on how do we develop the right market sectors and customer clientele? The previous leadership really took on way too much as we all know and it was kind of not right pursuit. So as we go forward there, we have a great government sector there. We have a terrific health care sector. We have a terrific health care sector. And the idea is how do we rifle shoot and make sure we're going after the right projects, applying the talent that we have in the business as well as developing new talent? And let's go execute great work again. So they've had a very -- over the years a very historic profitable track record in that $60 million to $70 million to $80 million range. And when we cracked that $100 million figure, it was just too much work. We paid a severe price and we're chasing our money to recover. So at this point I'd say, we have the right leadership in place, we've stabilized the business and now we're stepping back, making sure we're assessing the market to go after the right opportunities. And our concept was we would not sell any new major work until after the first half of the year. And at this point we're starting to kindle those opportunities, Brent and get back in line with our past. There is sufficient backlog in that business to deliver a decent year here in 2019. We don't expect any terrific bottom line contribution, but we already plugged that into our earlier forecast we did for the year. So I think we're going to use the rest of this year to just make sure the business has stabilized, go after the right markets and we'll see a nice rebound in growth as we go into 2020.

Got it. That's helpful Charlie. And then I guess as a follow-up as you -- and again I know more is to come on the outlook, but the expectation for sort of a normalized gross profit margin for the company going forward presume that -- I mean, does that suggest with 12% to 13%, is that what you would allude to?

Well, when you look at our comments around pulling out Mid-Atlantic, the rest of the business did extremely well with gross profit margins of 15.2%. John and I have been talking for a number of years saying, we expected the business to be operating in that 15% to 16% range. And in fact we did that in 2018 outside of Mid-Atlantic. So as you look at 2019, we expect those types of numbers to be generated as we go forward. As we look at the future, the pipeline, Brent, still remains extremely strong. We don't see any let-up of an opportunity on the construction side, and I think all the indexes I mentioned earlier support that. So we see an opportunity to continue to see what we can do to ratchet it up even more. So that's our intent right now. We're very focused on discipline and execution, and also looking at what we can do to maximize our bottom line. And, obviously, that includes see what we can do to reduce the margins.

Okay. Thanks for the color. I’ll pass it on.

All right, Brent. Thanks for the questions.

[Operator Instructions] Our next question is from Gerry Sweeney with ROTH Capital. Please proceed.

Hey, good morning Charlie and John.

Good morning, Gerry.

Maybe just a little bit of a follow-up to Brent's question, I mean questions. Is it fair to say maybe you're looking for less revenue growth and higher margin just taking a step back? I'm not sure if this is just in the Mid-Atlantic or the entire organization. With the hot market there is some constraints on labor stayed well within your bounds of labor availability and just start pricing your business incrementally higher and just go for margin. Is that a fair assumption or is there more to it?

Well, on the service side, we expect the growth to continue. Brent asked a great question before. And so on that segment, we don't see a let-up. We got our foot on the accelerator and we're going to continue to see what we could do to have good control growth in service, but we're excited about the prospects of where that's taking us. On the construction side of the equation, there's a finite limit right now to construction labor. So, supply and demand curves are clearly in our favor in terms of pricing. General contractors and building owners understand that there is that limitation out there right now. And it's just interesting the calls that we receive from -- not only from general contractors but building owners just asking us could you please do this project? Please do this project. And the reality is we're going to look at the projects where we can maximize our bottom-line. We are going to take advantage of the supply and demand curves in our favor. I think we've done some really smart things in terms of our labor forecasting. Previously, we were looking anywhere from three to six months out. Last year, we extended that to a 12-month forecast that each business unit has to present each month. I'm on those calls. I'm listening to what they're doing. So, our COOs John other representatives that oversee each business unit and we're going to be asking the questions why not ask for more? I mean why not go for a bit more here and there? I think right now it's time to make some good earnings and we expect to do that. So, from a topline perspective, I think when we report a few weeks in our guidance, we have pretty good visibility in our topline. So, right now it's about maximizing that bottom-line and see what we can do with future sales. So, Gerry, I hope that -- yes. So, I'm just going to really wrap-up. Construction, we expect modest growth. We don't expect no growth, we expect modest growth.

Okay, that's what I assumed. And I'm sorry I should have delineated between construction and service with my question. And actually jumping over to the service side, I think you talked -- you did mention LEAP and I think you even mentioned AI or so I guess artificial intelligence. And I know there's some -- they're starting to come into the different parts of the economy even the industrial world. Is there any way you can give a little bit more detail as to what you're doing and how you're using maybe some of this technology on LEAP and AI to differentiate yourself from your competitors?

Yes. So, well there's -- right now the border market really doesn't have what's called predictive analytics. There's some people out there saying they have it, but what's really interesting about the development of the software we're adopting, it's going to allow us to go in and help our customer base understand how to optimize the performance of their equipment. The nightmare for a building owner is a piece of equipment goes down. What our analytics will do will allow us to actually predict the maintenance requirements better than they do today. Quite frankly today it's really what a manufacturer may recommend, but it kind of loops -- and it's like if it's not broken don't do and stick with it. And what we're suggesting is let's go in, apply our new software and allow you to have a better service program which allows you to predict your maintenance expense, but also and more importantly allows you to make sure your building never goes down. In an analogy -- in an extreme analogy, a lot of jet manufacturers -- excuse me, the engine manufacturers know exactly when those engines have to be maintained and they have predictive analytics. Our industry is behind in that curve. We don't have that, but we now have software that will allow us to do it. Limbach, I think we're at the forefront at adopting that and offering that to our customer base. On the LEAP side of the equation, it's relatively new. We really launched the pilot back in Q3 to install it. We have it in a number of buildings at this point and we're now launching that to the entire business. We want to pilot it, understand what it could do, make sure we had our reports squared away with the software developer that we are working with. And we're now implementing that nation-wide to allow that to go to all of our customers within service. We think it's an enhancement and will allow us to do two things. One with existing customers, it's going to show that we really care about them. And we're evolving our business. We're just not a typical maintenance contractor. We're always thinking to take the next step with our offering. And they'll see the opportunity to create more efficiencies with their equipment and reduce the utility expense. And it also allows us now to open up doors to customers that are really concerned about that. So those buildings we don't maintain today, we crack the door open by offering an energy analysis platform that will say, well, that's intriguing and allow our salespeople to go in there and start offering them different opportunities that are Service as well as Construction for that matter can offer to them. Now, ultimately, it leads to energy-related projects. So, when we look at their utility consumption, there might be some things with utility that have to show the owner, there's a way to negotiate better utility rates, but we're also going to be looking at the energy analysis and then coming back with an upgrade to their BAS system Building Automation System, upgrading certain equipment that were just energy hogs that we can show them the payback at a relatively short period of time. So it really becomes an energy play and that's what we're ultimately excited about. So that's where we're going with LEAP and there are people who are really excited that they have another sales opportunity to just open up that door, offer something, and from a financial perspective, it clearly will create some terrific margin opportunities for us in the future with energy-type retrofit projects. Q – Gerry Sweeney: Got it, yes. And on the AI and LEAP, I understand the asset sort of management integrity. That's very interesting and great. And one just final question. Obviously, now that you have the financing in place and you're in better position in terms on the balance sheet side of the equation acquisitions, how do they look? Does that previous acquisition come back to life? Or has that -- have you moved beyond that? Just curious as to what you're -- we're seeing in that area. A – Charlie Bacon: Yes. Look our team did a great job at pulling that financing package together and having the capital opportunity there to get going again. We remain extremely proactive looking at different opportunities. We're seeking companies that fit our criteria. And once we see the right opportunity that's accretive to our bottom line, we'll make the recommendation to our Board of Directors to move on the deal. The Dunbar opportunity that we previously discussed, great company. We were obviously very disappointed we couldn't get it closed. We'll have to see great group of people. We'll revisit it possibly in the future see if the owners want to sell. But yes, we were disappointed; we couldn't get that deal done. I do want to say though; we remain extremely focused on our organic strategy. So we're going to -- you heard our quantity of backlog. We've settled things down at mid-Atlantic. We're focused on modest growth on our Construction and rapid growth of Service. So that organic model really has a lot of our attention right now. But we do have the resources in place which I think you're all aware of to continue that proactive pursuit to find the right opportunity. And once we see the right opportunity, we'll present it to our Board of Directors. Q – Gerry Sweeney: Got it, great. I appreciate it. Thank you.

[Operator Instructions] I would now like to turn the conference back over to management for closing remarks.

Well, I want to thank everybody for listening in this morning. We had a tough 2018 with mid-Atlantic. I view it as being behind us. We learned quite a bit and we applied those lessons learned and we'll recap whatever we said. We look forward to having our call here in several weeks and reporting in on Q1 and also providing 2019 guidance. With that, thanks again for listening in and look forward to being in touch with many of you. All the best.

Thank you. This concludes today's conference. You may disconnect your lines at this time and thank you for your participation.