Limbach Holdings, Inc. (NASDAQ:LMB) Q1 2025 Earnings Call Transcript
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Overview
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.
Key Financial Performance
Total Revenue $133.1 million (up 11.9% year-over-year from $119 million) due to growth in the ODR segment.
ODR Revenue $90.4 million (up 21.7% year-over-year) reflecting the company's strategic shift towards owner direct services.
GCR Revenue Declined by 4.5% as part of the intentional mix shift strategy towards ODR.
Total Gross Profit $36.7 million (up 18.1% from $31.1 million) driven by higher-margin ODR revenue and contributions from acquisitions.
Total Gross Margin 27.6% (up from 26.1% in Q1 2024) due to a higher proportion of ODR revenue.
ODR Gross Profit $26.2 million (up 18% year-over-year) with ODR gross margins at 28.9%, slightly down from 29.8% due to prior year write-ups.
GCR Gross Profit Increased by $1.6 million or 18.3% due to a more selective approach to projects, increasing GCR gross margins to 24.7% from 20%.
SG&A Expense $26.5 million (up $3.6 million from $22.9 million) as a percentage of revenue increased to 19.9% from 19.2% due to new acquisitions.
Adjusted EBITDA $14.9 million (up 26.5% from $11.8 million) with an adjusted EBITDA margin of 11.2% compared to 9.9% in Q1 2024.
Net Income $10.2 million (up 34.6% from $7.6 million) with earnings per diluted share growing to $0.85 from $0.64.
Adjusted Net Income $13.5 million (up 38.9% from $9.7 million) with adjusted earnings per diluted share growing to $1.12 from $0.82.
Operating Cash Flow $2.2 million (improved by $6.2 million from a $3.9 million outflow in Q1 2024).
Free Cash Flow $15 million (up from $11.8 million in Q1 last year) representing a $3.3 million improvement.
Free Cash Flow Conversion Rate 101.1% compared to 100.3% last year.
Cash and Cash Equivalents $38.1 million as of March 31.
Total Debt $27.5 million, including $10 million borrowed on a 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 metropolitan statistical areas (MSAs), primarily along the east coast and throughout the Midwest that represent attractive expansion opportunities.
Owner Direct Revenue Growth: Revenue from the ODR segment has increased from less than 21% of total revenue in 2019 to 66.6% of total revenue for 2024, and 67.9% in Q1 of 2025.
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 Improvement: Operating cash inflow during the first quarter was $2.2 million compared to a $3.9 million operating cash outflow during the first quarter of last year, representing a $6.2 million improvement.
Proactive Customer Engagement: A big initiative for 2025 is to transition our strategic customer relationships from a reactive to a proactive approach with the goal to help influence and co-author customer budgets by the end of the year.
M&A Strategy: We are exploring additional opportunities aligned with our core capabilities and expanding our geographic footprint, with a focus on acquiring businesses with great cultures.
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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 core capabilities.
Regulatory Issues: Uncertainty around tariffs has been a topic of conversation, but Limbach has experienced a neutral effect on its business, 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 noted typical seasonality in Q1 due to weather and annual budget cycles, but has gained momentum as customers approve budgets for infrastructure upgrades.
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Guidance & Outlook
Owner Direct Revenue Growth: Revenue from the Owner Direct (ODR) segment increased from 66.6% of total revenue in 2024 to 67.9% in Q1 2025, with a projection to reach between 70% and 80% for full year 2025.
Sales Organization Expansion: Approximately 40 new professionals were added to the sales organization to enhance customer relationships and support ODR growth.
Climate Control Rental Equipment Investment: An additional $2 million was added to the climate control rental equipment fleet to meet increased demand.
Proactive Customer Relationship Strategy: A key initiative for 2025 is to transition customer relationships from reactive to proactive, aiming to influence customer budgets by year-end.
M&A Strategy: The company is focused on acquiring businesses that align with its owner direct mission and is exploring additional opportunities for geographic expansion.
Revenue Guidance: Full year 2025 revenue guidance is set between $610 million and $630 million.
Adjusted EBITDA Guidance: Adjusted EBITDA guidance for 2025 is projected to be in the range of $78 million to $82 million.
Free Cash Flow Conversion Rate: Targeting a free cash flow conversion rate of at least 75% for full year 2025.
CapEx Guidance: Expected CapEx run rate of approximately $4 million for 2025, excluding an additional $3.5 million investment in rental equipment.
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Shareholder Return Plan
Shareholder Return Plan: Limbach Holdings has not announced any specific share buyback program or dividend program during the earnings 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’s the risk on equipment prices?
A:Selling has become tougher as projects are more dispersed. Customers are urged to act quickly on proposals due to potential price changes, but tariffs have been neutral for us.
Q:When does an account manager get placed at an ODR client?
A:We research spending patterns and opportunities before placing an account manager, ensuring there is traction and potential for revenue.
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 opportunities.
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 ramp-up period for new salespeople?
A:About a third of our sales staff has been added recently, primarily on-site account managers. There is a ramp-up period that varies by account.
Q:Would you prefer to enter a new MSA organically or through acquisition?
A:Most entries into new MSAs will come from acquisitions, as they provide quicker scale and resources.
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 new sales reps.
Q:Did you see any impact from HVAC OEMs and distributors regarding disruptions?
A:It depends on the project, but disruptions can lead to decision points for customers.
Q:Is the M&A cadence still two to three deals a year?
A:We are looking to buy $8 million to $10 million companies, and 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 likelihood of maintaining gross margins above 20% lacked clarity on the factors influencing this.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Brooks Executive
CEO stockholder
Contractors month
England
Financial
Investor Relations
MSAs
Officer Brooks
President Chief
SEC
Transcript Holdings
ability
asset repair
business
construction
core
cost
customer relationship
cycle
discipline
fact
function commitment
investor presentation
measure
momentum
month year
partner
presentation Investor
pricing
progress
relationship assessment
result statement
system function
tariff
uncertainty
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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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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
