Limbach Holdings Inc

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.