Limbach (LMB) 6 Nov 24 2024 Q3 Earnings call transcript

In a recent earnings call, Limbach Holdings provided insights into its financial performance and strategic initiatives for the third quarter of 2024. The company, which has been executing a three-pillar strategy, reported a strong financial performance, with each pillar contributing significantly to its success.

Evolving the Business Model

The first pillar of Limbach's strategy revolves around shifting revenue to owner-direct relationships (ODR), which now accounts for 67% of the company's revenue and 77% of its gross profit. This shift has been a key driver of EBITDA growth and margin expansion. Limbach aims to reach 65% to 70% of revenue from ODR by the end of 2024, demonstrating a clear focus on this business model.

The second pillar is focused on evolved offerings and margin expansion. This strategy has been instrumental in not only driving organic growth but also enhancing the profitability of acquired companies. Limbach has invested in account managers to gain a deep understanding of its customers' facilities, enabling it to react quickly to their needs and proactively develop their long-term capital plans. This approach is expected to create additional value by providing MEP capital project solutions, equipment upgrades, and professional consultant services.

Acquisition Strategy

The third pillar of Limbach's strategy is scaling through acquisitions. The company has been acquiring businesses for single-digit EBITDA multiples, leveraging synergies from both sales mix shift and scale. The acquisition of Kent Island Mechanical in early September serves as an example of how tuck-in acquisitions can complement organic growth and create value for stockholders. By integrating Kent Island into its local operation and the Limbach platform, Limbach has strengthened relationships with key owner accounts in the Washington, D.C. metro area.

Financial Highlights

Limbach reported total revenue of $133.9 million for Q3 2024, marking a 4.8% increase from the previous year. ODR revenue grew by 41.3%, while GCR revenue declined by 33.9%. This decline in GCR revenue is a deliberate move towards higher-quality, shorter-duration projects. The company's ODR backlog also increased to $209.8 million, demonstrating a shift towards higher-margin ODR business.

Looking Ahead

Limbach expects total revenue to be in the range of $520 million to $540 million for 2024, with adjusted EBITDA projected to be between $60 million and $63 million. These projections reflect the company's strong performance in the first nine months of the year and its strategic focus on ODR and evolved offerings.

Limbach's outlook for 2024 is positive, with a focus on creating bundled solutions that combine its capabilities. The company aims to expand its relationships with key customers and transition local relationships into national customers, leveraging its suite of professional services and acquisition program. This approach positions Limbach well for future growth, particularly in mission-critical industries like data centers and healthcare.

Conclusion

Limbach Holdings' third quarter 2024 earnings call provided a comprehensive update on the company's financial performance and strategic initiatives. The company's focus on shifting revenue to owner-direct relationships, evolving offerings, and strategic acquisitions has resulted in a strong financial performance and a positive outlook for the future. With a clear focus on margin expansion, market share growth, and strategic acquisitions, Limbach is well-positioned for continued success in the building systems solutions sector.