• Total Revenue: $133.9 million, a 4.8% increase from $127.8 million.
• ODR Revenue: Grew 41.3% to $93 million.
• GCR Revenue: Declined 33.9% to $40.9 million.
• Gross Profit: Increased 15.6% to $36.1 million from $31.2 million.
• Gross Margin: Increased to 27% from 24.5%.
• Net Income: $7.5 million, up 4.1% from $7.2 million.
• Diluted Earnings Per Share: 62 compared to 61.
• Adjusted EBITDA: $17.3 million, a 27.2% increase from $13.6 million.
• Adjusted EBITDA Margin: 12.9%, up 227 basis points from 10.7%.
• Cash Flow from Operating Activities: $4.9 million compared to $17.2 million.
• Free Cash Flow: $13 million, an increase of 16.6% from $11.2 million.
• Cash and Cash Equivalents: $51.2 million at the end of Q3.
• Revolving Credit Facility Borrowing: $10 million at a weighted average interest rate of 5.72%.

• Warning! GuruFocus has detected 3 Warning Sign with LMB.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Limbach Holdings Inc (NASDAQ:LMB) reported a 4.8% increase in total revenue for the third quarter of 2024, reaching $133.9 million.
• The company achieved a significant 41.3% growth in Owner Direct Relationships (ODR) revenue, which now constitutes 69.4% of total revenue.
• Gross profit increased by 15.6% to $36.1 million, driven by higher ODR revenue and expanded gross margins.
• Limbach Holdings Inc (NASDAQ:LMB) raised its full-year revenue guidance to a range of $520 million to $540 million, up from the previous $515 million to $535 million.
• The company successfully completed four acquisitions, including Kent Island Mechanical, which are expected to enhance its market presence and customer relationships.

Negative Points

• General Contract Relationships (GCR) revenue declined by 33.9%, reflecting a strategic shift but also indicating a reduction in this segment.
• SG&A expenses increased by approximately $2.8 million, driven by higher payroll, stock-based compensation, and professional services fees.
• The free cash flow conversion of adjusted EBITDA decreased to 75.3% from 82.1% in the previous year, indicating a decline in cash flow efficiency.
• Despite a robust acquisition pipeline, the company remains cautious and measured in its approach, which may slow down potential growth opportunities.
• The company has not provided long-term growth guidance due to its ongoing transition, creating uncertainty about future performance expectations.

Q & A Highlights

Q: Can you provide insights into the current demand environment and which areas are performing well? A: Mike McCann, President and CEO, highlighted strong demand in data centers, healthcare, and industrial manufacturing. The company has focused on building durable demand through mission-critical accounts and offerings that align with their goal of becoming a building systems solutions company.

Q: How far along is Limbach in transitioning to the building services solution model? A: Mike McCann explained that they are still early in the transition, with a three-year plan to evolve offerings. The focus for 2024 has been on operational expenditures, with plans to assist customers in long-term capital planning by 2025, offering services like program management and engineering.

Q: What is the outlook for mergers and acquisitions, particularly after the Kent Island acquisition? A: Mike McCann stated that the company has completed four acquisitions since November 2021 and aims to be measured and strategic in future deals. They focus on cultural fit, niche markets, and customer lists, with a robust pipeline for future acquisitions.

Q: How much of the company's growth is coming from existing customers versus new ones? A: Mike McCann noted that a significant portion of growth is from existing customers, particularly in healthcare and data centers. The company employs a local and national approach to expand market share and bundle offerings for comprehensive solutions.

Q: Can you elaborate on the gross margin improvements and future expectations? A: Mike McCann indicated that the company sees long-term margin improvement opportunities, aiming to align with OEM-type companies. The focus is on evolving offerings, including rentals, data-driven solutions, and professional services, with a three-year plan to enhance margins.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.