Limbach Holdings Inc

Previous wording

The Company 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. The Company strives to be an indispensable partner to its customers by providing services that are essential to the operation of their businesses. The Company has more than 1,200 team members in 19 offices across the eastern United States. The Company’s team members uniquely combine engineering expertise with field installation skills to provide custom solutions that leverage its full life-cycle capabilities, which allows it to address both the operational and capital projects needs of its customers.

Current wording

The Company 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. The Company strives to be an indispensable partner to its customers by providing services that are essential to the operation of their businesses. The Company has more than 1,300 team members in 19 offices across the eastern United States. The Company’s team members uniquely combine engineering expertise with field installation skills to provide custom solutions that leverage its full life-cycle capabilities, which allows it to address both the operational and capital projects needs of its customers.

Previous wording

The change in fair value of contingent consideration relates to the remeasurement of the contingent consideration arrangements resulting from each of the Jake Marshall, LLC (“JMLLC”), Coating Solutions, LLC (“CSLLC”) (together with JMLLC, the Jake Marshall Transaction), the ACME Transaction and the Industrial Air Transaction. As a part of the total consideration for the Jake Marshall, ACME and Industrial Air transactions, the Company initially recognized $3.1 million, $1.5 million and $3.2 million, respectively, in contingent consideration associated with their respective earnout payments. The carrying values of the Jake Marshall, ACME and IA Earnout Payments are subject to remeasurement at fair value at each reporting date through the end of the respective earnout periods with any changes in the fair value reported as a separate component of operating income in the condensed consolidated statements of operations. See Note 8 – Fair Value Measurements in the accompanying notes to the Company’s condensed consolidated financial statements for further information.

Current wording

The change in fair value of contingent consideration relates to the remeasurement of the contingent consideration arrangements resulting from each of the Jake Marshall, LLC (“JMLLC”), Coating Solutions, LLC (“CSLLC”) (together with JMLLC, the Jake Marshall Transaction), the ACME Transaction, the Industrial Air Transaction and the Kent Island Transaction. As a part of the total consideration for the Jake Marshall, ACME, Industrial Air and Kent Island transactions, the Company initially recognized $3.1 million, $1.5 million, $3.2 million and $4.4 million, respectively, in contingent consideration associated with their respective earnout payments. The carrying values of the Jake Marshall, ACME, Industrial Air and Kent Island Earnout Payments are subject to remeasurement at fair value at each reporting date through the end of the respective earnout periods with any changes in the fair value reported as a separate component of operating income in the condensed consolidated statements of operations. See Note 8 – Fair Value Measurements in the accompanying notes to the Company’s condensed consolidated financial statements for further information.

Previous wording

Amortization expense represents periodic non-cash charges that consist of amortization of various intangible assets primarily including favorable leasehold interests and certain customer relationships in the ODR segment. As a result of the Jake Marshall Transaction, the Company recognized, in the aggregate, an additional $5.7 million of intangible assets associated with customer relationships with third-party customers, the acquired trade name and acquired backlog. In addition, as a result of the ACME Transaction, the Company recognized, in the aggregate, an additional $2.8 million of intangible assets associated with customer relationships with third-party customers and the acquired trade name, inclusive of the impact of certain measurement period adjustments. Lastly, as a result of the Industrial Air Transaction, the Company recognized, in the aggregate, an additional $8.7 million of intangible assets associated with customer relationships with third-party customers, the acquired trade name, trademarks and intellectual property and the acquired backlog. Each of the Jake Marshall, ACME and Industrial Air-related intangible assets were recorded under the acquisition method of accounting at their estimated fair values at the acquisition date. See Note 5 – Goodwill and Intangible Assets for further information on the Company’s intangible assets.

Current wording

Amortization expense represents periodic non-cash charges that consist of amortization of various intangible assets primarily including favorable leasehold interests and certain customer relationships. As a result of the Jake Marshall Transaction, the Company recognized, in the aggregate, an additional $5.7 million of intangible assets associated with customer relationships with third-party customers, the acquired trade name and acquired backlog. As a result of the ACME Transaction, the Company recognized, in the aggregate, an additional $2.8 million of intangible assets associated with customer relationships with third-party customers and the acquired trade name, inclusive of the impact of certain measurement period adjustments. In addition, as a result of the Industrial Air Transaction, the Company recognized, in the aggregate, an additional $8.7 million of intangible assets associated with customer relationships with third-party customers, the acquired trade name, trademarks and intellectual property and the acquired backlog. Lastly, as a result of the Kent Island Transaction, the Company recognized, in the aggregate, an additional $10.7 million of intangible assets associated with customer relationships with third-party customers, the acquired trade name and the acquired backlog. Each of the Jake Marshall, ACME, Industrial Air and Kent Island-related intangible assets were recorded under the acquisition method of accounting at their estimated fair values at the acquisition date. See Note 5 – Goodwill and Intangible Assets for further information on the Company’s intangible assets.

Previous wording

(3)Included within selling, general and administrative expenses was $1.5 million and $1.1 million of stock-based compensation expense for the three months ended June 30, 2024 and 2023, respectively.

Current wording

(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.

Previous wording

Revenue for the six months ended June 30, 2024 decreased by $4.7 million compared to the six months ended June 30, 2023. ODR revenue increased by $39.5 million, or 33.6%, while GCR revenue decreased by $44.2 million, or 34.4%. The increase in period-over-period ODR segment revenue was primarily due to the Company's continued focus on the accelerated growth of its ODR business and as a result of the ACME and Industrial Air transactions. These entities were not acquired entities of the Company for the six months ended June 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 ODR.

Current wording

Revenue for the three months ended September 30, 2024 increased by $6.2 million compared to the three months ended September 30, 2023. ODR revenue 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 the accelerated growth of its ODR business and, as a result of the Industrial Air Transaction. Industrial Air was not an acquired entity of the Company 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 ODR.

Previous wording

The Company's gross profit for the three months ended June 30, 2024 increased by $5.0 million compared to the three months ended June 30, 2023. ODR gross profit increased $8.1 million, or 47.1%, due to the combination of an increase in revenue and higher margins driven by contract mix. GCR gross profit decreased $3.1 million, or 27.7%, primarily due to lower revenue despite higher margins on project work period-over-period. The total gross profit percentage increased from 22.8% for the three months ended June 30, 2023 to 27.4% for the same period ended in 2024, mainly driven by the mix of higher margin ODR segment work, the Company becoming more selective when pursuing GCR work, and as a result of the ACME and Industrial Air transactions. These entities were not acquired entities of the Company for the three months ended June 30, 2023.

Current wording

The Company's gross profit for the three months ended September 30, 2024 increased by $4.9 million compared to the three months ended September 30, 2023. ODR gross profit increased $10.4 million, or 53.8%, due to the combination of an increase in revenue and higher margins driven by contract mix. GCR gross profit decreased $5.5 million, or 46.0%, primarily due to lower revenue and lower margins on project work period-over-period. The total gross profit percentage increased from 24.5% for the three months ended September 30, 2023 to 27.0% for the same period ended in 2024, mainly driven by the mix of higher margin ODR segment work, the Company becoming more selective when pursuing GCR work, and as a result of the Industrial Air Transaction. Industrial Air was not an acquired entity of the Company for the three months ended September 30, 2023.

Previous wording

The Company recorded revisions in its contract estimates for certain ODR and GCR projects. During the three months ended June 30, 2024, the Company recorded material gross profit write-ups on two ODR projects and two GCR projects for a total of $1.5 million and $1.5 million, respectively, that had a net gross profit impact of $0.5 million or more. During the three months ended June 30, 2023, the Company did not record any material gross profit write-ups or write-downs that had a net gross profit impact of $0.5 million or more.

Current wording

During the three months ended September 30, 2024, the Company recorded revisions in its contract estimates for certain ODR and GCR projects; however, the Company did not record any gross profit write-ups or write-downs that had a net gross profit impact of $0.5 million or more. During the three months ended September 30, 2023, the Company recorded gross profit write-ups on three GCR projects for a total of $3.1 million, inclusive of a $1.2 million write-up related to the settlement of a past claim, and one GCR project gross profit write-down for $0.7 million and one ODR project gross profit write-down for $0.6 million.

Previous wording

The Company's SG&A expense for the three months ended June 30, 2024 increased by approximately $2.8 million compared to the three months ended June 30, 2023. The increase in SG&A expense was primarily due to approximately $1.5 million of collective SG&A related expenses incurred within the ACME and Industrial Air entities during the three months ended June 30, 2024 that were not acquired entities of the Company during the three months ended June 30, 2023. The Company’s SG&A expense for the three months ended June 30, 2024 also increased due to a $1.7 million increase in payroll related expenses, a $0.4 million increase in stock-based compensation expenses and a $0.2 million increase in travel and entertainment expenses. Partly offsetting the increase in SG&A expense was a $0.6 million decrease related to professional services fees. As a result of these factors, SG&A expense as a percentage of revenue increased to 19.0% for the three months ended June 30, 2024 as compared to 16.3% for the three months ended June 30, 2023.

Current wording

The Company's SG&A expense for the three months ended September 30, 2024 increased by approximately $2.8 million compared to the three months ended September 30, 2023. The increase in SG&A expense was primarily due to approximately $1.0 million of SG&A expenses incurred within the Industrial Air entity during the three months ended September 30, 2024 that was not an acquired entity of the Company during the three months ended September 30, 2023. The Company’s SG&A expense for the three months ended September 30, 2024 also increased due to 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 result of these factors, SG&A expense as a percentage of revenue increased to 17.7% for the three months ended September 30, 2024 as compared to 16.4% for the three months ended September 30, 2023.

Previous wording

The change in fair value of the Earnout Payments contingent consideration was a $1.1 million and a $0.2 million loss for the three months ended June 30, 2024 and 2023, respectively. These increases to the contingent liability were primarily attributable to the timing component and probability of meeting the gross profit margins associated with the contingent consideration arrangements as of June 30, 2024 and 2023. See Note 8 – Fair Value Measurements in the accompanying notes to the Company’s condensed consolidated financial statements for further information on the Company's earnout arrangements.

Current wording

The change in fair value of the Earnout Payments contingent consideration was a $0.6 million and a $0.2 million loss for the three months ended September 30, 2024 and 2023, respectively. These increases to the contingent liability were primarily attributable to the timing component and probability of meeting the gross profit margins associated with the contingent consideration arrangements as of September 30, 2024 and 2023. See Note 8 – Fair Value Measurements in the accompanying notes to the Company’s condensed consolidated financial statements for further information on the Company's earnout arrangements.

Previous wording

Total amortization expense for the three months ended June 30, 2024 and 2023 was $1.0 million and $0.4 million, respectively. As a result of the ACME and Industrial Air transactions, the Company acquired certain intangible assets in which it recognized approximately $0.8 million of amortization expense for the three months ended June 30, 2024. See Note 5 - Goodwill and Intangible Assets for further information on the Company's intangible assets.

Current wording

Total amortization expense for the three months ended September 30, 2024 and 2023 was $0.9 million and $0.3 million, respectively. As a result of the Industrial Air and Kent Island acquisitions, the Company acquired certain intangible assets in which it recognized an increase of approximately $0.6 million of amortization expense period-over-period. See Note 5 - Goodwill and Intangible Assets for further information on the Company's intangible assets.

Previous wording

Total other income for the three months ended June 30, 2024 was $0.2 million as compared to total other expenses of $0.2 million for the three months ended June 30, 2023. The change period-over-period was primarily driven by a $0.3 million increase in interest income related to the Company's overnight repurchase agreements, investments in U.S. Treasury Bills and money market funds and a $0.3 million loss on early debt extinguishment recognized during 2023. Interest expense for the three months ended June 30, 2024 decreased by $0.1 million, which was primarily driven by interest expense on the Company's former A&R Wintrust Term Loan which was extinguished in May 2023. In addition, the Company recognized a $0.2 million loss period-over-period associated with its interest rate swap arrangement.

Current wording

Total other expenses for the three months ended September 30, 2024 was less than $0.1 million as compared to total other income of $0.1 million for the three months ended September 30, 2023. The change period-over-period was primarily driven by a $0.4 million loss period-over-period associated with the Company's interest rate swap arrangement, partly offset by a $0.2 million increase in interest income related to the Company's overnight repurchase agreements, investments in U.S. Treasury Bills and money market funds.

Previous wording

The Company recorded an income tax provision of $2.4 million for the three months ended June 30, 2024 compared to $2.0 million for the three months ended June 30, 2023. The effective tax rate was 28.7% and 27.6% for the three months ended June 30, 2024 and 2023, respectively. The difference between the U.S. federal statutory tax rate and the Company’s effective tax rate period-over-period was primarily due to state income taxes, tax credits, other permanent adjustments and discrete tax items.

Current wording

The Company recorded an income tax provision of $3.4 million for the three months ended September 30, 2024 compared to $2.8 million for the three months ended September 30, 2023. The effective tax rate was 31.2% and 27.7% for the three months ended September 30, 2024 and 2023, respectively. The difference between the U.S. federal statutory tax rate and the Company’s effective tax rate period-over-period was primarily due to state income taxes, tax credits, other permanent adjustments and discrete tax items.

Previous wording

Comparison of Results of Operations for the six months ended June 30, 2024 and 2023

Current wording

Comparison of Results of Operations for the nine months ended September 30, 2024 and 2023

Previous wording

The following table presents operating results for the six months ended June 30, 2024 and 2023 in dollars and expressed as a percentage of total revenue (except as indicated below), as compared below:

Current wording

The following table presents operating results for the nine months ended September 30, 2024 and 2023 in dollars and expressed as a percentage of total revenue (except as indicated below), as compared below:

Previous wording

(3)Included within selling, general and administrative expenses was $2.7 million and $2.2 million of stock-based compensation expense for the six months ended June 30, 2024 and 2023, respectively.

Current wording

(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.

Previous wording

Revenue for the three months ended June 30, 2024 decreased by $2.6 million compared to the three months ended June 30, 2023. ODR revenue increased by $24.0 million, or 40.8%, while GCR revenue decreased by $26.6 million, or 40.3%. The increase in period-over-period ODR segment revenue was primarily due to the Company's continued focus on the accelerated growth of its ODR business and as a result of the ACME and Industrial Air transactions. These entities were not acquired entities of the Company for the three months ended June 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 ODR.

Current wording

Revenue for the nine months ended September 30, 2024 increased by $1.5 million compared to the nine months ended September 30, 2023. ODR revenue increased by $66.7 million, or 36.4%, while GCR revenue decreased by $65.2 million, or 34.3%. The increase in period-over-period ODR segment revenue was primarily due to the Company's continued focus on the accelerated growth of its ODR business and as a result of the ACME and Industrial Air acquisitions. Certain of these entities were not acquired entities of the Company during the full nine 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 ODR.

Previous wording

The Company's gross profit for the six months ended June 30, 2024 increased by $9.9 million compared to the six months ended June 30, 2023. ODR gross profit increased $14.4 million, or 43.4%, due to the combination of an increase in revenue and higher margins driven by contract mix. GCR gross profit decreased $4.5 million, or 20.9%, primarily due to lower revenue despite higher margins on project work period-over-period. The total gross profit percentage increased from 22.3% for the six months ended June 30, 2023 to 26.8% for the same period ended in 2024, mainly driven by the mix of higher margin ODR segment work, the Company becoming more selective when pursuing GCR work, and as a result of the ACME and Industrial Air transactions. These entities were not acquired entities of the Company for the six months ended June 30, 2023.

Current wording

The Company's gross profit for the nine months ended September 30, 2024 increased by $14.7 million compared to the nine months ended September 30, 2023. ODR gross profit increased $24.7 million, or 47.2%, due to the combination of an increase in revenue and higher margins driven by contract mix. GCR gross profit decreased $10.0 million, or 29.9%, primarily due to lower revenue despite higher margins on project work period-over-period. The total gross profit percentage increased from 23.0% for the nine months ended September 30, 2023 to 26.8% for the same period ended in 2024, mainly driven by the mix of higher margin ODR segment work, the Company becoming more selective when pursuing GCR work, and as a result of the ACME and Industrial Air acquisitions.

Previous wording

The Company recorded revisions in its contract estimates for certain ODR and GCR projects. During the six months ended June 30, 2024, the Company recorded material gross profit write-ups on four ODR projects and two GCR projects for a total of $3.9 million and $1.7 million, respectively, that had a net gross profit impact of $0.5 million or more. During the six months ended June 30, 2023, the Company did not record any material gross profit write-ups or write-downs that had a net gross profit impact of $0.5 million or more.

Current wording

The Company recorded revisions in its contract estimates for certain ODR and GCR projects. During the nine months ended September 30, 2024, the Company recorded gross profit write-ups on four ODR projects and two GCR projects for a total of $3.9 million and $1.5 million, respectively, and one GCR project gross profit write-down for a total of $0.6 million that had a net gross profit impact of $0.5 million or more. During the nine months ended September 30, 2023, the Company recorded gross profit write-ups on two GCR projects for a total of $2.2 million, inclusive of a $1.2 million write-up related to the settlement of a past claim, and one GCR project gross profit write-down for $0.5 million and one ODR project gross profit write-down for $0.7 million.

Previous wording

The Company's SG&A expense for the six months ended June 30, 2024 increased by approximately $4.6 million compared to the six months ended June 30, 2023. The increase in SG&A expense was primarily due to approximately $2.6 million of collective SG&A related expenses incurred within the ACME and Industrial Air entities during the six months ended June 30, 2024 that were not acquired entities of the Company during the six months ended June 30, 2023. The Company’s SG&A expense for the six months ended June 30, 2024 also increased due to a $1.9 million increase in payroll related expenses, a $0.5 million increase in stock-based compensation expenses and a $0.5 million increase in travel and entertainment expenses. Partly offsetting the increase in SG&A expense was a $0.4 million decrease related to professional services fees. As a result of these factors, SG&A expense as a percentage of revenue increased to 19.1% for the six months ended June 30, 2024 as compared to 16.9% for the six months ended June 30, 2023.

Current wording

The Company's SG&A expense for the nine months ended September 30, 2024 increased by approximately $7.4 million compared to the nine months ended September 30, 2023. The increase in SG&A expense was primarily due to approximately $3.7 million of collective SG&A expenses incurred within the ACME and Industrial Air entities during the nine months ended September 30, 2024 that were not acquired entities of the Company during the full nine months ended September 30, 2023. The Company’s SG&A expense for the nine months ended September 30, 2024 also increased due to a $2.9 million increase in payroll related expenses and a $0.9 million increase in stock-based compensation expenses. As a result of these factors, SG&A expense as a percentage of revenue increased to 18.6% for the nine months ended September 30, 2024 as compared to 16.7% for the nine months ended September 30, 2023.

Previous wording

The change in fair value of the Earnout Payments contingent consideration was a $1.7 million and a $0.3 million loss for the six months ended June 30, 2024 and 2023, respectively. These increases to the contingent liability were primarily attributable to the timing component and probability of meeting the gross profit margins associated with the contingent consideration arrangements as of June 30, 2024 and 2023. See Note 8 – Fair Value Measurements in the accompanying notes to the Company’s condensed consolidated financial statements for further information on the Company's earnout arrangements.

Current wording

The change in fair value of the Earnout Payments contingent consideration was a $2.3 million and a $0.5 million loss for the nine months ended September 30, 2024 and 2023, respectively. These increases to the contingent liability were primarily attributable to the timing component and probability of meeting the gross profit margins associated with the contingent consideration arrangements as of September 30, 2024 and 2023. See Note 8 – Fair Value Measurements in the accompanying notes to the Company’s condensed consolidated financial statements for further information on the Company's earnout arrangements.

Previous wording

Total amortization expense for the six months ended June 30, 2024 and 2023 was $2.1 million and $0.8 million, respectively. As a result of the ACME and Industrial Air transactions, the Company acquired certain intangible assets in which it recognized approximately $1.6 million of amortization expense for the six months ended June 30, 2024. See Note 5 - Goodwill and Intangible Assets for further information on the Company's intangible assets.

Current wording

Total amortization expense for the nine months ended September 30, 2024 and 2023 was $3.0 million and $1.1 million, respectively. As a result of the ACME, Industrial Air and Kent Island acquisitions, the Company acquired certain intangible assets in which it recognized an increase of approximately $2.3 million of amortization expense period-over-period. See Note 5 - Goodwill and Intangible Assets for further information on the Company's intangible assets.

Previous wording

Total other income for the six months ended June 30, 2024 was $0.9 million as compared to total other expenses of $1.2 million for the six months ended June 30, 2023. The change period-over-period was primarily driven by a $0.9 million increase in interest income related to the Company's overnight repurchase agreements, investments in U.S. Treasury Bills and money market funds and a $0.3 million decrease in interest expense, which was the result of lower overall outstanding debt. In addition, during the six months ended June 30, 2024, the Company recognized a gain of $0.6 million related to the sale of certain property and equipment compared to a less than $0.1 million loss recognized in 2023.

Current wording

Total other income for the nine months ended September 30, 2024 was $0.9 million as compared to total other expenses of $1.1 million for the nine months ended September 30, 2023. The change period-over-period was primarily driven by a $1.1 million increase in interest income related to the Company's overnight repurchase agreements, investments in U.S. Treasury Bills and money market funds, a $0.3 million loss on early debt extinguishment recognized during 2023 and a $0.2 million decrease in interest expense, which was the result of lower overall outstanding debt. In addition, during the nine months ended September 30, 2024, the Company recognized a gain of $0.7 million related to the sale of certain property and equipment compared to a less than $0.1 million loss recognized in 2023.

Previous wording

The Company recorded an income tax provision of $2.1 million for the six months ended June 30, 2024 compared to $2.6 million for the six months ended June 30, 2023. The effective tax rate was 13.2% and 24.2% for the six months ended June 30, 2024 and 2023, respectively. The difference between the U.S. federal statutory tax rate and the Company’s effective tax rate period-over-period was primarily due to state income taxes, tax credits, other permanent adjustments and discrete tax items. In particular, the Company’s effective rate for the six months ended June 30, 2024 and 2023 were materially impacted by “excess tax benefits on stock-based compensation” recognized discretely during the first quarter of each year. This benefit reduced the effective tax rate by 35.1% and 10.2% for the three months ended March 31, 2024 and 2023 respectively, with the impact varying in prior years. The increase in the 2024 effective rate reduction is primarily related to the higher stock price of the Company resulting in increased tax deductions for the Company upon vesting of equity incentive awards.

Current wording

The Company recorded an income tax provision of $5.5 million for the nine months ended September 30, 2024 compared to $5.4 million for the nine months ended September 30, 2023. The effective tax rate was 20.6% and 25.9% for the nine months ended September 30, 2024 and 2023, respectively. The difference between the U.S. federal statutory tax rate and the Company’s effective tax rate period-over-period was primarily due to state income taxes, tax credits, other permanent adjustments and discrete tax items. In particular, the Company’s effective rate for the nine months ended September 30, 2024 and 2023 were materially impacted by “excess tax benefits on stock-based compensation” recognized discretely during the first quarter of each year. This benefit reduced the effective tax rate by 35.1% and 10.2% for the three months ended March 31, 2024 and 2023 respectively, with the impact varying in prior years. The increase in the 2024 effective rate reduction is primarily related to the higher stock price of the Company resulting in increased tax deductions for the Company upon vesting of equity incentive awards.

Previous wording

The Company refers to its estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue it had recognized under such contracts, as “backlog.” Backlog includes unexercised contract options. The Company’s backlog includes projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions. Additionally, the difference between the Company’s backlog and remaining performance obligations is due to the portion of unexercised contract options that are excluded, under certain contract types, from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time by the Company or the customer without considerable cost incurred by the customer. Additional information related to the Company’s remaining performance obligations is provided in Note 4.

Current wording

The Company refers to its estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue it had recognized under such contracts, as “backlog.” Backlog includes unexercised contract options. The Company’s backlog includes projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions. Additionally, the difference between the Company’s backlog and remaining performance obligations is due to the portion of unexercised contract options that are excluded, under certain contract types, from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time by the Company or the customer without considerable cost incurred by the customer. In addition to the Company's backlog, it has a substantial amount of contracts with short lead times that book-and-bill within the same reporting period and are not included in backlog. Additional information related to the Company’s remaining performance obligations is provided in Note 4.

Previous wording

The Company's ODR backlog as of June 30, 2024 was $177.7 million compared to $147.0 million at December 31, 2023. These amounts reflect unrecognized revenue expected to be recognized over the remaining terms of our service contracts and projects. Based on historical trends, the Company currently estimates that 80% of its ODR backlog as of June 30, 2024 will be recognized as revenue over the remainder of 2024. The Company believes its ODR backlog increased due to its continued focus on the accelerated growth of its ODR business.

Current wording

The Company's ODR backlog as of September 30, 2024 was $209.8 million compared to $147.0 million at December 31, 2023. These amounts reflect unrecognized revenue expected to be recognized over the remaining terms of our service contracts and projects. Based on historical trends, the Company currently estimates that 37% of its ODR backlog as of September 30, 2024 will be recognized as revenue over the remainder of 2024. The Company believes its ODR backlog increased due to its continued focus on the accelerated growth of its ODR business.

Previous wording

In addition, the Company's GCR backlog as of June 30, 2024 was $151.6 million compared to $186.9 million at December 31, 2023. Projects are brought into backlog once the Company has been provided a written confirmation of award and the contract value has been established. At any point in time, the Company has a substantial volume of projects that are specifically identified and advanced in negotiations and/or documentation, however those projects are not booked as backlog until the Company has received written confirmation from the owner or the GC/CM of their intention to award the Company the contract and they have directed the Company to begin engineering, designing, incurring construction labor costs or procuring needed equipment and material. The Company’s GCR projects tend to be built over a 12- to 24-month schedule depending upon scope and complexity. Most major projects have a preconstruction planning phase which may require months of planning before actual construction commences. The Company is occasionally employed to deliver a “fast-track” project, where construction commences as the preconstruction planning work continues. As work on the Company’s projects progress, it increases or decreases backlog to take into account its estimate of the effects of changes in estimated quantities, changes in conditions, change orders and other variations from initially anticipated contract revenue, and the percentage of completion of the Company’s work on the projects. Based on historical trends, the Company currently estimates that 60% of its GCR backlog as of June 30, 2024 will be recognized as revenue over the remainder of 2024. Additionally, the reduction in GCR backlog has been intentional as the Company looks to focus on higher margin projects than historically, as well as its focus on smaller, higher margin owner direct projects.

Current wording

In addition, the Company's GCR backlog as of September 30, 2024 was $161.5 million compared to $186.9 million at December 31, 2023. Projects are brought into backlog once the Company has been provided a written confirmation of award and the contract value has been established. At any point in time, the Company has a substantial volume of projects that are specifically identified and advanced in negotiations and/or documentation, however those projects are not booked as backlog until the Company has received written confirmation from the owner or the GC/CM of their intention to award the Company the contract and they have directed the Company to begin engineering, designing, incurring construction labor costs or procuring needed equipment and material. The Company’s GCR projects tend to be built over a 12- to 24-month schedule depending upon scope and complexity. Most major projects have a preconstruction planning phase which may require months of planning before actual construction commences. The Company is occasionally employed to deliver a “fast-track” project, where construction commences as the preconstruction planning work continues. As work on the Company’s projects progress, it increases or decreases backlog to take into account its estimate of the effects of changes in estimated quantities, changes in conditions, change orders and other variations from initially anticipated contract revenue, and the percentage of completion of the Company’s work on the projects. Based on historical trends, the Company currently estimates that 31% of its GCR backlog as of September 30, 2024 will be recognized as revenue over the remainder of 2024. Additionally, the reduction in GCR backlog has been intentional as the Company looks to focus on higher margin projects than historically, as well as its focus on smaller, higher margin owner direct projects.

Previous wording

The Company's existing current backlog is projected to provide substantial coverage of forecasted revenue for one year from the date of the financial statement issuance. The Company's current cash balance, together with cash it expects to generate from future operations along with borrowings available under its credit facility, are expected to be sufficient to finance its short- and long-term capital requirements (or meet working capital requirements) for at least the next twelve months. In addition to the future operating cash flows of the Company, along with its existing borrowing availability and access to financial markets, the Company currently believes it will be able to meet any working capital and future operating requirements, and capital investment forecast opportunities for at least the next twelve months.

Current wording

The Company's existing current backlog is projected to provide substantial coverage of forecasted revenue for one year from the date of the financial statement issuance. In addition to the Company's backlog, it has a substantial amount of contracts with short lead times that book-and-bill within the same reporting period and are not included in backlog. The Company's current cash balance, together with cash it expects to generate from future operations along with borrowings available under its credit facility, are expected to be sufficient to finance its short- and long-term capital requirements (or meet working capital requirements) for at least the next twelve months. In addition to the future operating cash flows of the Company, along with its existing borrowing availability and access to financial markets, the Company currently believes it will be able to meet any working capital and future operating requirements, and capital investment forecast opportunities for at least the next twelve months.

Previous wording

During the six months ended June 30, 2024, the Company generated $12.6 million in cash for its operating activities, which consisted of net income of $13.5 million and certain non-cash adjustments of $11.4 million (primarily depreciation and amortization, stock-based compensation expense, operating lease expense and the change in fair value of contingent consideration), partly offset by cash used in working capital of $12.4 million. During the six months ended June 30, 2023, the Company generated $26.3 million from its operating activities, which consisted of cash provided by working capital of $9.4 million, $8.6 million of non-cash adjustments (primarily depreciation and amortization, stock-based compensation expense, operating lease expense and the change in fair value of contingent consideration) and net income for the period of $8.3 million.

Current wording

During the nine months ended September 30, 2024, the Company generated $17.5 million in cash for its operating activities, which consisted of net income of $21.0 million and certain non-cash adjustments of $17.2 million (primarily depreciation and amortization, stock-based compensation expense, operating lease expense and the change in fair value of contingent consideration), partly offset by cash used in working capital of $20.8 million. During the nine months ended September 30, 2023, the Company generated $43.5 million from its operating activities, which consisted of cash provided by working capital of $15.1 million, $12.8 million of non-cash adjustments (primarily depreciation and amortization, stock-based compensation expense, operating lease expense and the change in fair value of contingent consideration) and net income for the period of $15.5 million.

Previous wording

The decrease in operating cash flows during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily attributable to a $36.6 million period-over-period cash outflow related to the change in accounts receivable, which was due to the timing of cash receipts. This cash outflow was partially offset by a $6.3 million cash inflow period-over-period related to the aggregate change in our contract assets and liabilities and a $9.6 million change in accounts payable, including retainage. The increase in the Company's overbilled position was due to the timing of contract billings and the recognition of contract revenue, as well as the successful resolution of certain outstanding claims. The cash inflow associated with the Company's accounts payable was due to the timing of cash payments.

Current wording

The decrease in operating cash flows during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily attributable to a $17.4 million period-over-period cash outflow related to the aggregate change in the Company's contract assets and liabilities and a $17.6 million change in accounts receivable. The decrease in the Company's overbilled position was due to the timing of contract billings and the recognition of contract revenue, as well as the successful resolution of certain prior year outstanding claims. The change in accounts receivable period-over-period was due to the timing of cash receipts. These cash outflows were partially offset by a $5.5 million increase in net income and a $4.4 million increase on non-cash operating activities, primarily related to depreciation and amortization and the changes in fair value on the Company's contingent consideration arrangements.

Previous wording

Cash flows used in investing activities were $5.2 million and $1.2 million for the six months ended June 30, 2024 and 2023, respectively. Cash used in investing activities for the six months ended June 30, 2024 included a $5.8 million cash outflow related to the purchase of property and equipment, which was primarily associated with the purchase of certain rental equipment to expand customer service offerings, partially offset by $0.6 million in proceeds from the sale of property and equipment. For the six months ended June 30, 2023, $1.5 million was used to purchase property and equipment, which was partially offset by $0.3 million in proceeds from the sale of property and equipment.

Current wording

Cash flows used in investing activities were $17.7 million and $6.2 million for the nine months ended September 30, 2024 and 2023, respectively. Cash used in investing activities for the nine months ended September 30, 2024 included a cash outflow of $12.7 million associated with the Kent Island Transaction, net of cash acquired, and $6.2 million in cash outflows related to the purchase of property and equipment, which was primarily associated with the purchase of certain rental equipment to expand customer service offerings. These cash outflows were partially offset by $1.2 million in proceeds from the sale of property and equipment. Cash used in investing activities for the nine months ended September 30, 2023 of $4.9 million represented cash outflows associated with the ACME Transaction, net of cash acquired. In addition, cash used in investing activities for the nine months ended September 30, 2023 included $1.7 million, which was used to purchase property and equipment, partially offset by $0.4 million in proceeds from the sale of property and equipment.

Previous wording

Aside from the rental equipment purchased during the first half of 2024, the majority of the Company's cash used for investing activities in both periods was for capital additions pertaining to tools and equipment, computer software and hardware purchases, office furniture and office related leasehold improvements.

Current wording

Aside from the rental equipment purchased during 2024, the majority of the Company's cash used for investing activities in both periods was for capital additions pertaining to tools and equipment, computer software and hardware purchases, office furniture and office related leasehold improvements.

Previous wording

Cash flows used in financing activities were $7.6 million for the six months ended June 30, 2024 compared to $15.2 million for the six months ended June 30, 2023. During the six months ended June 30, 2024, the Company paid approximately $5.2 million in taxes related to the net share settlement of equity awards, $1.4 million for payments on finance leases and made a $3.0 million payment to the former owners of JMLLC and CSLLC related to the 2023 Earnout Period, of which $1.3 million was recognized as a cash outflow from financing activities. These cash financing outflows were partially offset by $0.3 million associated with proceeds from employee contributions to the ESPP.

Current wording

Cash flows used in financing activities were $8.4 million for the nine months ended September 30, 2024 compared to $15.8 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Company paid approximately $5.2 million in taxes related to the net share settlement of equity awards, $2.3 million for payments on finance leases and made $3.5 million in aggregate payments to the former owners of JMLLC, CSLLC and ACME related to their respective 2023 earnout arrangements, of which $1.3 million was recognized as a cash outflow from financing activities. These cash financing outflows were partially offset by $0.4 million associated with proceeds from employee contributions to the ESPP.

Previous wording

For the six months ended June 30, 2023, as a result of the execution of the Second A&R Wintrust Credit Agreement, the Company paid off the remaining principal portion of the A&R Wintrust Term Loan of $19.0 million. Prior to the termination of the A&R Wintrust Term Loan, the Company made principal payments of $2.4 million, consisting of monthly installment payments of $0.6 million. In addition, the Company paid approximately $0.8 million in taxes related to net share settlement of equity awards, $1.3 million for payments on finance leases and made a $3.0 million payment to the former owners of JMLLC and CSLLC related to the 2022 Earnout Period, of which $1.7 million was recognized as a cash outflow from financing activities. These cash financing outflows were partially offset by $10.0 million in proceeds from borrowings under the Second A&R Wintrust Revolving Loan and $0.2 million associated with proceeds from contributions to the ESPP.

Current wording

For the nine months ended September 30, 2023, as a result of the execution of the Second A&R Wintrust Credit Agreement, the Company paid off the remaining principal portion of the A&R Wintrust Term Loan of $19.0 million. Prior to the termination of the A&R Wintrust Term Loan, the Company made principal payments of $2.4 million, consisting of monthly installment payments of $0.6 million. In addition, the Company paid approximately $0.8 million in taxes related to net share settlement of equity awards, $2.0 million for payments on finance leases and made a $3.0 million payment to the former owners of JMLLC and CSLLC related to the 2022 Earnout Period, of which $1.7 million was recognized as a cash outflow from financing activities. These cash financing outflows were partially offset by $10.0 million in proceeds from borrowings under the Second A&R Wintrust Revolving Loan and $0.4 million associated with proceeds from contributions to the ESPP.

Previous wording

(1) The Company considers all highly liquid investments purchased with a maturity of 90 days or less on the date of purchase to be cash equivalents. Cash equivalents as of June 30, 2024 consisted of certain overnight repurchase agreements, as well as money market investments and one U.S. Treasury Bill.

Current wording

(1) The Company considers all highly liquid investments purchased with a maturity of 90 days or less on the date of purchase to be cash equivalents. Cash equivalents as of September 30, 2024 consisted of certain overnight repurchase agreements and money market investments.

Previous wording

Management continued to devote additional resources to its billing and collection efforts during the six months ended June 30, 2024. Management continues to expect that growth in our ODR business, which is less sensitive to the cash flow issues presented by large GCR projects, should positively impact our cash flow trends.

Current wording

Management continued to devote additional resources to its billing and collection efforts during the nine months ended September 30, 2024. Management continues to expect that growth in our ODR business, which is less sensitive to the cash flow issues presented by large GCR projects, should positively impact our cash flow trends.

Previous wording

Provided that the Company’s lenders continue to provide working capital funding, the Company believes based on its current forecast that its current cash and cash equivalents of $59.5 million as of June 30, 2024, cash payments to be received from existing and new customers, and availability of borrowing under the Second A&R Wintrust Revolving Loan (pursuant to which we had $35.7 million of availability as of June 30, 2024) will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.

Current wording

Provided that the Company’s lenders continue to provide working capital funding, the Company believes based on its current forecast that its current cash and cash equivalents of $51.2 million as of September 30, 2024, cash payments to be received from existing and new customers, and availability of borrowing under the Second A&R Wintrust Revolving Loan (pursuant to which we had $35.7 million of availability as of September 30, 2024) will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.

Previous wording

In connection with its business, the Company is occasionally required to provide various types of surety bonds that provide an additional measure of security to its customers for its performance under certain government and private sector contracts. The Company’s ability to obtain surety bonds depends upon its capitalization, working capital, past performance, management expertise and external factors, including the capacity of the overall surety market. Surety companies consider such factors in light of the amount of the Company’s backlog that it has currently bonded and their current underwriting standards, which may change from time-to-time. The bonds, if any, the Company provides typically reflect the contract value. As of June 30, 2024 and December 31, 2023, the Company had approximately $79.2 million and $90.9 million in surety bonds outstanding, respectively. The Company believes that its $800.0 million bonding capacity provides us with a significant competitive advantage relative to many of our competitors which we believe have limited bonding capacity. See Note 13 for further discussion.

Current wording

In connection with its business, the Company is occasionally required to provide various types of surety bonds that provide an additional measure of security to its customers for its performance under certain government and private sector contracts. The Company’s ability to obtain surety bonds depends upon its capitalization, working capital, past performance, management expertise and external factors, including the capacity of the overall surety market. Surety companies consider such factors in light of the amount of the Company’s backlog that it has currently bonded and their current underwriting standards, which may change from time-to-time. The bonds, if any, the Company provides typically reflect the contract value. As of September 30, 2024 and December 31, 2023, the Company had approximately $62.8 million and $90.9 million in surety bonds outstanding, respectively. The Company believes that its $800.0 million bonding capacity provides us with a significant competitive advantage relative to many of our competitors which we believe have limited bonding capacity. See Note 13 for further discussion.