Limbach Holdings, Inc. Announces Third Quarter 2024 Results

About this update from Limbach Holdings, Inc.

Raising 2024 Adjusted EBITDA Guidance after Delivering Q3 Net Income of $7.5 million and Record Quarterly Adjusted EBITDA of $17.3 million WARRENDALE, Pa. --(BUSINESS WIRE)-- Limbach Holdings, Inc. (Nasdaq: LMB) (“Limbach” or the “Company”) today announced its financial results for the quarter ended September 30, 2024 . 2024 Third Quarter Financial Overview Compared to 2023 Third Quarter Owner Direct Relationships (“ODR”) revenue increased 41.3%, or $27.2 million , to $93.0 million accounting for 69.4% of total revenue. Total revenue was $133.9 million , an increase of 4.8% from $127.8 million . Total gross profit was $36.1 million , an increase of 15.6% from $31.2 million . ODR gross profit accounted for $29.6 million , or 82.1%, of total gross profit. Net income of $7.5 million , or $0.62 per diluted share, compared to net income of $7.2 million , or $0.61 per diluted share. Adjusted EBITDA of $17.3 million , up 27.2% from $13.6 million . Net cash provided by operating activities of $4.9 million compared to $17.2 million . Management Comments “In the third quarter, we continued to execute the three pillars of our strategy with each pillar contributing to our EBITDA growth and gross margin expansion,” said Michael McCann , President and Chief Executive Officer of Limbach Holdings . “Our results are a direct outcome of executing our plan to shift our business to working directly for building owners on existing facilities, evolving our service offerings and scaling through acquisitions. “We are seeing durable customer demand for our value-added solutions and achieving organic growth by focusing on deeper penetration with existing customers. Demand in all verticals has been strong, and we believe the long-term growth potential of data centers is set to play an increasingly important role for demand. “Our recent acquisition of Kent Island Mechanical increased market share within the Greater Washington, D.C. metro region. We immediately began integrating Kent Island on to the Limbach platform to expand our capabilities, gain efficiencies and add new customers to our existing ODR business. We’re pleased with the initial progress and anticipate making additional acquisitions at a pace of about two to three per year from our strong pipeline of potential targets. “We are quickly approaching our ODR and GCR target revenue mix of 65% to 70% ODR for 2024, and in 2025 we expect to see growth in our top line, total consolidated revenue.” The following are results for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 : Total revenue was $133.9 million , an increase of 4.8% from $127.8 million . ODR segment revenue of $93.0 million increased by $27.2 million , or 41.3%, while GCR revenue decreased by $21.0 million , or 33.9%. The increase in period-over-period ODR segment revenue was primarily due to the Company's continued focus on accelerating the growth of its ODR business and as a result of the Industrial Air transaction. Industrial Air was not an acquired entity for the three months ended September 30, 2023 . The decrease in period-over-period GCR segment revenue was primarily due to the Company’s continued focus on the execution of its mix-shift strategy to the ODR segment. Total gross profit was $36.1 million , compared to $31.2 million . ODR gross profit increased $10.4 million , or 53.8%, due to the combination of an increase in revenue and higher segment margins of 31.9% versus 29.3% driven by contract mix. GCR gross profit decreased $5.5 million , or 46.0%, primarily due to lower revenue and lower margins of 15.8% compared to 19.3% in the prior period. The total gross profit percentage increased from 24.5% to 27.0%, mainly driven by the mix of higher margin ODR segment work, the Company continuing to being more selective when pursuing GCR work, and the Industrial Air transaction. Selling, general and administrative (“SG&A”) expenses increased by approximately $2.8 million , to $23.7 million , compared to $21.0 million . The increase in SG&A expense was primarily due to $1.0 million of SG&A expenses incurred within the Industrial Air entity that was not an acquired entity of the Company during the three months ended September 30, 2023 , a $1.1 million increase in payroll related expenses, a $0.5 million increase in stock-based compensation expenses and a $0.4 million increase in professional services fees. As a percent of revenue, SG&A expenses were 17.7%, up from 16.4% in the prior period. Interest expense was relatively flat at $0.5 million during the current quarter compared to $0.4 million . Interest income was $0.6 million during the current quarter compared to $0.4 million . This increase was due to the Company's timing and amounts of investments in overnight repurchase agreements, U.S. Treasury Bills, and money market funds period-over-period. Net income was $7.5 million compared to $7.2 million , an increase of 4.1%. Diluted earnings per share was $0.62 as compared to $0.61 in the prior period. Adjusted EBITDA was $17.3 million compared to $13.6 million in the prior period, an increase of 27.2%. Net cash provided by operating activities of $4.9 million compared to $17.2 million in the prior period primarily due to changes in working capital. Balance Sheet At September 30, 2024 , cash and cash equivalents were $51.2 million . Current assets were $217.1 million and current liabilities were $138.2 million at September 30, 2024 , representing a current ratio of 1.57x compared to 1.50x at December 31, 2023 . Working capital was $78.9 million at September 30, 2024 , an increase of $7.1 million from December 31, 2023 . At September 30, 2024 , we had $10.0 million in borrowings against our revolving credit facility and $4.3 million for standby letters of credit. 2024 Guidance We are updating our guidance for FY 2024 as follows: Current Previous Revenue $520 million - $540 million $515 million - $535 million Adjusted EBITDA $60 million - $63 million $55 million - $58 million With respect to projected 2024 Adjusted EBITDA guidance and Adjusted EBITDA Margin, a quantitative reconciliation is not available without unreasonable efforts due to the high variability, complexity and low visibility with respect to certain items, which are excluded from Adjusted EBITDA. We expect the variability of these items to have a potentially unpredictable, and potentially significant, impact on future financial results. Conference Call Details Date: Wednesday, November 6, 2024 Time: 9:00 a.m. Eastern Time Participant Dial-In Numbers: Domestic callers: (877) 407-6176 International callers: +1 (201) 689-8451 Access by Webcast The call will also be simultaneously webcast over the Internet via the “Investor Relations” section of Limbach’s website at www.limbachinc.com or by clicking on the conference call link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=O8Y8RPcV . An audio replay of the call will be archived on Limbach’s website for 365 days. About Limbach Limbach is a building systems solution firm that partners with building owners and facilities managers who have mission critical mechanical (heating, ventilation and air conditioning), electrical and plumbing infrastructure. We strive to be an indispensable partner to our customers by providing services that are essential to the operation of their businesses. We work with building owners primarily in six vertical markets: healthcare, industrial and manufacturing, data centers, life science, higher education, and cultural and entertainment. We have more than 1,300 team members in 19 offices across the eastern United States . Our team members uniquely combine engineering expertise with field installation skills to provide custom solutions that leverage our full life-cycle capabilities, which allows us to address both the operational and capital projects needs of our customers. Additional Information Investors and others should note that Limbach announces material financial information to its investors using its investor relations website, U.S. Securities and Exchange Commission filings, press releases, public conference calls/videos, and webcasts. Limbach uses these channels, as well as social media, to communicate with our stockholders and the public about the Company, the Company’s services and other Company information. It is possible that the information that Limbach posts on social media could be deemed to be material information. Therefore, Limbach encourages investors, the media, and others interested in the Company to review the information posted on the social media channels listed on Limbach’s investor relations website. Forward-Looking Statements We make forward-looking statements in this press release within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts for future events, including, without limitation, our earnings, Adjusted EBITDA, revenues, expenses, backlog, capital expenditures or other future financial or business performance or strategies, results of operations or financial condition, and in particular statements regarding the impact of the COVID-19 pandemic on the construction industry in future periods, timing of the recognition of backlog as revenue, the potential for recovery of cost overruns, and the ability of Limbach to successfully remedy the issues that have led to write-downs in various business units. These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target,” “goal,” or similar expressions. These forward-looking statements are based on information available to us as of the date they were made and involve a number of risks and uncertainties, which may cause them to turn out to be wrong. Some of these risks and uncertainties may in the future be amplified by the COVID-19 outbreak and there may be additional risks that we consider immaterial or which are unknown. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Please refer to our most recent annual report on Form 10-K, as well as our subsequent filings on Form 10-Q and Form 8-K, which are available on the SEC’s website ( www.sec.gov ), for a full discussion of the risks and other factors that may impact any forward-looking statements in this press release. LIMBACH HOLDINGS, INC. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended September 30 , Nine Months Ended September 30 , (in thousands, except share and per share data) 2024 2023 2024 2023 Revenue $ 133,920 $ 127,768 $ 375,131 $ 373,659 Cost of revenue 97,806 96,524 274,421 287,675 Gross profit 36,114 31,244 100,710 85,984 Operating expenses: Selling, general and administrative 23,748 20,967 69,800 62,433 Change in fair value of contingent consideration 610 161 2,344 464 Amortization of intangibles 868 288 2,956 1,054 Total operating expenses 25,226 21,416 75,100 63,951 Operating income 10,888 9,828 25,610 22,033 Other (expenses) income: Interest expense (468 ) (437 ) (1,375 ) (1,615 ) Interest income 626 377 1,734 624 Gain on disposition of property and equipment 99 68 656 28 Loss on early debt extinguishment — — — (311 ) (Loss) gain on change in fair value of interest rate swap (267 ) 116 (130 ) 153 Total other (expenses) income (10 ) 124 885 (1,121 ) Income before income taxes 10,878 9,952 26,495 20,912 Income tax provision 3,394 2,760 5,462 5,407 Net income $ 7,484 $ 7,192 $ 21,033 $ 15,505 Earnings Per Share (“EPS”) Earnings per common share: Basic $ 0.66 $ 0.66 $ 1.87 $ 1.45 Diluted $ 0.62 $ 0.61 $ 1.75 $ 1.33 Weighted average number of shares outstanding: Basic 11,272,798 10,962,622 11,233,847 10,695,973 Diluted 12,027,021 11,789,137 11,998,750 11,671,819 LIMBACH HOLDINGS, INC. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share and per share data) September 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 51,163 $ 59,833 Restricted cash 65 65 Accounts receivable (net of allowance for credit losses of $425 and $292 as of September 30, 2024 and December 31, 2023 , respectively) 101,014 97,755 Contract assets 56,937 51,690 Other current assets 7,965 7,657 Total current assets 217,144 217,000 Property and equipment, net 25,088 20,830 Intangible assets, net 32,830 24,999 Goodwill 21,246 16,374 Operating lease right-of-use assets 22,312 19,727 Deferred tax asset 5,618 5,179 Other assets 179 330 Total assets $ 324,417 $ 304,439 LIABILITIES Current liabilities: Current portion of long-term debt $ 2,626 $ 2,680 Current operating lease liabilities 3,964 3,627 Accounts payable, including retainage 51,776 65,268 Contract liabilities 46,997 42,160 Accrued income taxes 1,758 446 Accrued expenses and other current liabilities 31,084 30,967 Total current liabilities 138,205 145,148 Long-term debt 20,497 19,631 Long-term operating lease liabilities 18,569 16,037 Other long-term liabilities 4,947 2,708 Total liabilities 182,218 183,524 STOCKHOLDERS’ EQUITY Common stock, $0.0001 par value; 100,000,000 shares authorized, issued 11,452,753 and 11,183,076, respectively, and 11,273,101 and 11,003,424 outstanding, respectively 1 1 Additional paid-in capital 92,779 92,528 Treasury stock, at cost (179,652 shares at both period ends) (2,000 ) (2,000 ) Retained earnings 51,419 30,386 Total stockholders’ equity 142,199 120,915 Total liabilities and stockholders’ equity $ 324,417 $ 304,439 LIMBACH HOLDINGS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30 , (in thousands) 2024 2023 Cash flows from operating activities: Net income $ 21,033 $ 15,505 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 8,261 5,751 Provision for credit losses 159 186 Stock-based compensation expense 4,323 3,374 Noncash operating lease expense 3,092 2,843 Amortization of debt issuance costs 32 69 Deferred income tax provision (439 ) (1 ) Gain on sale of property and equipment (656 ) (28 ) Loss on change in fair value of contingent consideration 2,344 464 Loss on early debt extinguishment — 311 Gain on change in fair value of interest rate swap 130 (153 ) Changes in operating assets and liabilities: Accounts receivable 4,283 21,896 Contract assets (1,115 ) 14,014 Other current assets (395 ) (1,459 ) Accounts payable, including retainage (18,418 ) (18,703 ) Prepaid income taxes — 95 Accrued taxes payable 1,311 (1,386 ) Contract liabilities 10 2,312 Operating lease liabilities (2,895 ) (2,803 ) Accrued expenses and other current liabilities (1,446 ) 1,997 Payment of contingent consideration liability in excess of acquisition-date fair value (2,175 ) (1,224 ) Other long-term liabilities 55 400 Net cash provided by operating activities 17,494 43,460 Cash flows from investing activities: Kent Island Transaction, net of cash acquired (12,716 ) — ACME Transaction, net of cash acquired — (4,883 ) Proceeds from sale of property and equipment 1,171 370 Advances from joint ventures 7 — Purchase of property and equipment (6,187 ) (1,720 ) Net cash used in investing activities (17,725 ) (6,233 ) Cash flows from financing activities: Payments on A&R Wintrust Term Loans — (21,452 ) Proceeds from Wintrust Revolving Loan — 10,000 Payment of contingent consideration liability up to acquisition-date fair value (1,325 ) (1,776 ) Payments on finance leases (2,296 ) (1,991 ) Payments of debt issuance costs — (50 ) Taxes paid related to net-share settlement of equity awards (5,187 ) (847 ) Proceeds from contributions to Employee Stock Purchase Plan 369 313 Net cash used in financing activities (8,439 ) (15,803 ) (Decrease) increase in cash, cash equivalents and restricted cash (8,670 ) 21,424 Cash, cash equivalents and restricted cash, beginning of period 59,898 36,114 Cash, cash equivalents and restricted cash, end of period $ 51,228 $ 57,538 Supplemental disclosures of cash flow information Noncash investing and financing transactions: Earnout liability associated with the Kent Island Transaction $ 4,381 $ — Earnout liability associated with the ACME Transaction — 1,121 Right of use assets obtained in exchange for new operating lease liabilities $ 4,776 $ 1,043 Right of use assets obtained in exchange for new finance lease liabilities 3,095 4,062 Right of use assets disposed or adjusted modifying operating lease liabilities 988 (643 ) Right of use assets disposed or adjusted modifying finance lease liabilities — (77 ) Interest paid 1,413 1,482 Cash paid for income taxes $ 4,700 $ 6,718 LIMBACH HOLDINGS, INC. Condensed Consolidated Segment Operating Results (Unaudited) Three Months Ended September 30 , Increase/(Decrease) (in thousands, except for percentages) 2024 2023 $ % Statement of Operations Data: Revenue: ODR $ 93,007 69.4 % $ 65,832 51.5 % $ 27,175 41.3 % GCR 40,913 30.6 % 61,936 48.5 % (21,023 ) (33.9 )% Total revenue 133,920 100.0 % 127,768 100.0 % 6,152 4.8 % Gross profit: ODR(1) 29,647 31.9 % 19,274 29.3 % 10,373 53.8 % GCR(2) 6,467 15.8 % 11,970 19.3 % (5,503 ) (46.0 )% Total gross profit 36,114 27.0 % 31,244 24.5 % 4,870 15.6 % Selling, general and administrative(3) 23,748 17.7 % 20,967 16.4 % 2,781 13.3 % Change in fair value of contingent consideration 610 0.5 % 161 0.1 % 449 278.9 % Amortization of intangibles 868 0.6 % 288 0.2 % 580 201.4 % Total operating income $ 10,888 8.1 % $ 9,828 7.7 % $ 1,060 10.8 % (1) As a percentage of ODR revenue. (2) As a percentage of GCR revenue. (3) Included within selling, general and administrative expenses was $1.6 million and $1.1 million of stock-based compensation expense for the three months ended September 30, 2024 and 2023, respectively. LIMBACH HOLDINGS, INC. Condensed Consolidated Segment Operating Results (Unaudited) Nine Months Ended September 30 , Increase/(Decrease) (in thousands, except for percentages) 2024 2023 $ % Statement of Operations Data: Revenue: ODR $ 250,017 66.6 % $ 183,330 49.1 % $ 66,687 36.4 % GCR 125,114 33.4 % 190,329 50.9 % (65,215 ) (34.3 )% Total revenue 375,131 100.0 % 373,659 100.0 % 1,472 0.4 % Gross profit: ODR(1) 77,170 30.9 % 52,424 28.6 % 24,746 47.2 % GCR(2) 23,540 18.8 % 33,560 17.6 % (10,020 ) (29.9 )% Total gross profit 100,710 26.8 % 85,984 23.0 % 14,726 17.1 % Selling, general and administrative(3) 69,800 18.6 % 62,433 16.7 % 7,367 11.8 % Change in fair value of contingent consideration 2,344 0.6 % 464 0.1 % 1,880 405.2 % Amortization of intangibles 2,956 0.8 % 1,054 0.3 % 1,902 180.5 % Total operating income $ 25,610 6.8 % $ 22,033 5.9 % $ 3,577 16.2 % (1) As a percentage of ODR revenue. (2) As a percentage of GCR revenue. (3) Included within selling, general and administrative expenses was $4.3 million and $3.4 million of stock-based compensation expense for the nine months ended September 30, 2024 and 2023, respectively. Non-GAAP Financial Measures In assessing the performance of our business, management utilizes a variety of financial and performance measures. The key measures are Adjusted EBITDA and Adjusted EBITDA Margin, which are non-GAAP financial measures. We define Adjusted EBITDA as net income plus depreciation and amortization expense, interest expense, and taxes, as further adjusted to eliminate the impact of, when applicable, other non-cash items or expenses that are unusual or non-recurring that we believe do not reflect our core operating results. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenue. We believe that Adjusted EBITDA and Adjusted EBITDA Margin are meaningful to our investors to enhance their understanding of our financial performance for the current period and our ability to generate cash flows from operations that are available for taxes, capital expenditures and debt service. We understand that these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties as a measure of financial performance and to compare our performance with the performance of other companies that report Adjusted EBITDA and Adjusted EBITDA Margin. Our calculation of Adjusted EBITDA and Adjusted EBITDA Margin, however, may not be comparable to similarly titled measures reported by other companies. When assessing our operating performance, investors and others should not consider this data in isolation or as a substitute for net income calculated in accordance with GAAP. Further, the results presented by Adjusted EBITDA and Adjusted EBITDA Margin cannot be achieved without incurring the costs that the measure excludes. A reconciliation of net income to Adjusted EBITDA, the most comparable GAAP measure, is provided below. We refer to our estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue we have recognized under such contracts, as “backlog.” Backlog includes unexercised contract options. Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDA Margin Three Months Ended September 30 , Nine Months Ended September 30 , (in thousands) 2024 2023 2024 2023 Net income $ 7,484 $ 7,192 $ 21,033 $ 15,505 Adjustments: Depreciation and amortization 2,741 1,892 8,261 5,751 Interest expense 468 437 1,375 1,615 Interest income (626 ) (377 ) (1,734 ) (624 ) Non-cash stock-based compensation expense 1,603 1,140 4,323 3,374 Loss on early debt extinguishment — — — 311 Change in fair value of interest rate swap 267 (116 ) 130 (153 ) CEO transition costs — — — 958 Income tax provision 3,394 2,760 5,462 5,407 Acquisition and other transaction costs 826 225 877 524 Change in fair value of contingent consideration 610 161 2,344 464 Restructuring costs(1) 565 317 827 1,089 Adjusted EBITDA $ 17,332 $ 13,631 $ 42,898 $ 34,221 Revenue $ 133,920 $ 127,768 $ 375,131 $ 373,659 Adjusted EBITDA Margin 12.9 % 10.7 % 11.4 % 9.2 % (1) For the three and nine months ended September 30, 2024 and 2023, the majority of the restructuring costs related to our Southern California and Eastern Pennsylvania branches. View source version on businesswire.com : https://www.businesswire.com/news/home/20241105655435/en/ Investor Relations Financial Profiles, Inc. Julie Kegley [email protected] Source: Limbach Holdings, Inc.

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