Limbach Holdings, Inc. (LMB) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance with significant growth in revenue, gross profit, and net income. The company is expanding its high-margin ODR segment and has a solid liquidity position. Despite some operational risks and vague responses in the Q&A, the optimistic guidance, improved margins, and strategic acquisitions suggest a positive outlook. The absence of a share repurchase program is a minor concern, but overall, the financial health and growth prospects indicate a positive stock price movement.
Key Financial Performance
Total Revenue $133.1 million (up 11.9% from $119 million in Q1 2024) - Growth driven by increased ODR revenue.
ODR Revenue $90.4 million (up 21.7% year-over-year) - Significant growth as ODR accounted for 67.9% of total revenue, up from 62.4% in Q1 2024.
Gross Profit $36.7 million (up 18.1% from $31.1 million in Q1 2024) - Reflects focus on growing ODR segment.
Gross Margin 27.6% (up from 26.1% in Q1 2024) - Driven by higher-margin ODR revenue and higher quality GCR work.
ODR Gross Profit $26.2 million (up 18% year-over-year) - Slight decrease in gross margin percentage due to $2 million of gross profit write-ups in Q1 2024.
GCR Gross Profit $10.4 million (up 18.3% year-over-year) - Increased due to a more selective approach to projects.
SG&A Expense $26.5 million (up $3.6 million from $22.9 million in Q1 2024) - Increase includes expenses from newly acquired entities.
Adjusted EBITDA $14.9 million (up 26.5% from $11.8 million in Q1 2024) - Adjusted EBITDA margin improved to 11.2% from 9.9%.
Net Income $10.2 million (up 34.6% from $7.6 million in Q1 2024) - Strong growth reflecting overall business performance.
Earnings per Diluted Share $0.85 (up 32.8% from $0.64 in Q1 2024) - Growth in net income contributed to higher earnings per share.
Adjusted Net Income $13.5 million (up 38.9% from $9.7 million in Q1 2024) - Reflects strong operational performance.
Free Cash Flow $15 million (up from $11.8 million in Q1 2024) - Improvement in cash flow from operating activities.
Operating Cash Flow $2.2 million (compared to a $3.9 million outflow in Q1 2024) - Represents a $6.2 million improvement.
Cash and Cash Equivalents $38.1 million as of March 31, 2025 - Strong liquidity position.
Total Debt $27.5 million - Includes $10 million borrowed on revolving credit facility.
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Operating Highlights
Climate Control Rental Equipment: In Q1, we added an additional $2 million to our climate control rental equipment fleet to position ourselves to meet increased demand as temperatures rise.
Geographic Expansion: We have identified an additional 20 to 30 MSAs, primarily along the east coast and throughout the Midwest that represent attractive expansion opportunities.
Revenue Growth: Compared to Q1 of 2024, Q1 2025 total revenue grew 11.9%, ODR revenue rose 21.7%, and gross profit expanded by 18.1%.
Sales Team Expansion: In the past year, we've added approximately 40 new professionals to our sales organization, accounting for approximately one-third of the sales team.
Free Cash Flow: Free cash flow for Q1 was $15 million compared to $11.8 million in Q1 last year, representing a $3.3 million improvement.
Owner Direct Strategy: Revenue from the ODR segment has increased from less than 21% of total revenue in 2019 to 67.9% in Q1 2025, with a projection of 70% to 80% for full year 2025.
Proactive Customer Relationships: A big initiative for 2025 is to transition our strategic customer relationships from a reactive to a proactive approach.
M&A Strategy: We are exploring additional opportunities aligned with our core capabilities and expanding our geographic footprint.
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Risk or Challenges
Competitive Pressures: Increased activity in the M&A market has positively impacted Limbach's competitive position, but the company remains focused on acquiring businesses that align with its owner direct mission critical customers.
Regulatory Issues: Uncertainty around tariffs has been a topic of conversation, but the effect on Limbach's business has been neutral, with customers accelerating purchasing decisions to lock in pricing.
Supply Chain Challenges: The company’s model is designed to respond quickly to market dynamics, allowing it to avoid macroeconomic volatility and deliver consistent value even in uncertain times.
Economic Factors: The company has experienced typical seasonality in Q1 due to weather and annual budget cycles, but has gained momentum as customers approve budgets for infrastructure upgrades.
Operational Risks: The transition from a reactive to a proactive approach in customer relationships is a significant initiative, which requires effective data collection and analysis to influence customer budgets.
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Guidance & Outlook
Owner Direct Revenue Growth: Revenue from the Owner Direct (ODR) segment increased from less than 21% of total revenue in 2019 to 66.6% in 2024, and 67.9% in Q1 2025, with a projection of 70% to 80% for full year 2025.
Climate Control Equipment Investment: An additional $2 million was added to the climate control rental equipment fleet to meet increased demand.
Customer Relationship Strategy: Transitioning strategic customer relationships from reactive to proactive, aiming to influence customer budgets by year-end.
Geographic Expansion: Identified 20 to 30 additional metropolitan statistical areas (MSAs) for potential expansion, primarily along the east coast and Midwest.
M&A Strategy: Focused on acquiring businesses aligned with owner direct mission critical customers, with a strong pipeline of opportunities.
Revenue Guidance: Full year 2025 revenue target is between $610 million and $630 million.
Adjusted EBITDA Guidance: Full year 2025 adjusted EBITDA target is between $78 million and $82 million.
CapEx Guidance: Expected CapEx run rate of approximately $4 million for 2025, excluding an additional $3.5 million investment in rental equipment.
Free Cash Flow Guidance: Targeting a free cash flow conversion rate of at least 75% for full year 2025.
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Shareholder Return Plan
Share Repurchase Program: Limbach Holdings has not announced any share repurchase program during the call.
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Key Q&A
Q:Could you just give us a sense of where the healthcare market's been and how you see it trending?
A:The healthcare vertical market has been a key focus for us, showing stability. There has been deferred maintenance over the past few years, and hospitals are now planning for long-term capital needs. We expect a slow ramp-up in activity.
Q:How much of the projects do you think were pulled forward due to tariff risk and what is the risk on equipment prices?
A:Selling has become tougher as projects are more dispersed. Customers need to act quickly on proposals due to potential price changes, and our ability to pass costs along has been beneficial.
Q:When does an account manager get placed at an ODR client?
A:We research the facility's spending patterns and ensure there's traction before placing an onsite account manager.
Q:Can you provide a percentage of ODR clients that are at the partnership stage?
A:Each branch focuses on five core strategic customers, but the number varies. We aim to connect local relationships to national ones.
Q:How likely is it to keep the gross margin on GCR above 20% over the next year?
A:We are guiding for a blended gross margin of 28% to 29%, but it depends on the project mix.
Q:Can you provide more detail on the new salespeople and their ramp-up period?
A:About 40 new salespeople were added, which is a third of our sales staff. Most are onsite account managers, and there is a ramp-up period depending on the account.
Q:Would you prefer to enter a new MSA organically or through acquisition?
A:Most entries into new MSAs will come from acquisitions, but we have done organic starts when the right team is in place.
Q:Was the acceleration in March more than seasonally normal?
A:There is seasonality, but the acceleration was due to a greater owner direct mix and the new sales reps.
Q:Did you see any impact from HVAC OEMs and distributors regarding disruption?
A:It depends on the project, but disruptions can lead customers to make decisions on equipment repairs.
Q:Is the M&A cadence still two to three deals a year?
A:We are looking to buy $8 million to $10 million businesses. The competitive landscape has allowed us to differentiate ourselves.
Q:Review of Unclear Management Responses
A:Management avoided providing specific percentages regarding the number of ODR clients at the partnership stage, and their response about the impact of HVAC OEMs and distributors was somewhat vague, lacking specific details.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Brooks Executive
Chief Executive
Chief Financial
Executive Officer
Executive Vice
Financial Officer
Financial Profiles
Investor Relations
MSAs
Officer Brooks
President Chief
SEC
Vice President
ability
asset repair
business
capability
core
cost
customer relationship
discipline
investor presentation
measure
model
momentum
month year
partner
pricing
progress
relationship assessment
sale
statement
tariff
uncertainty
LMB Transcript
Limbach Holdings, Inc. (LMB) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call highlights strong ODR growth, strategic M&A activities, and a focus on margin improvement. Despite lower margins in Pioneer Power, management is proactive in addressing these issues. The Q&A reveals positive sentiment around future revenue growth and capital projects. However, some uncertainty exists regarding future SG&A costs and margin improvement timelines. Overall, the optimistic guidance, strong customer relationships, and strategic initiatives suggest a positive stock price movement in the short term, likely between 2% to 8%.
Limbach Holdings, Inc. (LMB) Q2 2025 Earnings Call Transcript
Positive8-6
The earnings call showed strong financial performance with significant revenue and profit growth, particularly in the Owner Direct Revenue segment. Despite some concerns about seasonal demand and debt, the proactive customer relationship strategy and geographic expansion plans are promising. The Q&A highlighted a focus on high-margin projects and strategic growth in key verticals, with management providing optimistic guidance. Although there was a short-term dilution in gross margins from Pioneer, the overall outlook remains positive, supported by increased free cash flow and effective expense management.
Limbach Holdings, Inc. (NASDAQ:LMB) Q1 2025 Earnings Call Transcript
Positive5-7
The earnings call presents a strong financial performance with significant growth in revenue, gross profit, and net income. The company's strategic focus on high-margin ODR services and successful acquisitions contribute positively. Despite some unclear responses in the Q&A, the overall guidance is optimistic with expected revenue and EBITDA growth. The lack of a shareholder return plan is a minor drawback, but the positive financial metrics and strategic initiatives outweigh this. The predicted stock price movement is positive, considering the robust growth and optimistic future outlook.
Limbach Holdings, Inc. (LMB) Q1 2025 Earnings Call Transcript
Positive5-6
The earnings call reveals strong financial performance with significant growth in revenue, gross profit, and net income. The company is expanding its high-margin ODR segment and has a solid liquidity position. Despite some operational risks and vague responses in the Q&A, the optimistic guidance, improved margins, and strategic acquisitions suggest a positive outlook. The absence of a share repurchase program is a minor concern, but overall, the financial health and growth prospects indicate a positive stock price movement.
LMB Report
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