Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Limbach Holdings Inc (LMB, Financial) achieved a record second quarter total gross margin of 27.4%, up from 22.8% in the prior year.
- The company successfully increased its Owner-Direct Relationships (ODR) revenue to 67.7% of total revenue, up from 47.1% last year.
- ODR revenue grew by 40.8% to $82.8 million, reflecting the company's strategic shift towards higher-margin business.
- Adjusted EBITDA for the second quarter increased by 16% to $13.8 million, with a margin expansion to 11.3%.
- Limbach Holdings Inc (LMB) increased its full-year revenue and adjusted EBITDA guidance, indicating confidence in continued growth and profitability.
Negative Points
- Total revenue for the quarter declined by 2.1% to $122.2 million, due to the strategic shift away from General Contractor Relationships (GCR).
- GCR revenue decreased by 40.3% to $39.5 million, reflecting the company's intentional reduction in this lower-margin segment.
- SG&A expenses increased by approximately $2.8 million to $23.2 million, driven by recent acquisitions and higher payroll costs.
- The company's acquisition pipeline, while strong, has shown limited progress to date, indicating potential delays in expansion plans.
- Despite the strategic shift, the company still faces challenges in balancing its GCR and ODR revenue mix to optimize profitability.
Q & A Highlights
Q: What are the current strong verticals for Limbach Holdings, and how do they align with the company's strategy?
A: Michael McCann, President and CEO, highlighted that the company's focus on mission-critical verticals like healthcare, industrial manufacturing, data centers, and higher education is paying off. These sectors require uninterrupted operations, which aligns with Limbach's strategy of providing maintenance and upgrades to existing infrastructure. The healthcare sector, in particular, shows significant deferred maintenance needs, which could lead to future capital projects.
Q: What is the expected trajectory for EBITDA margin expansion as the company continues its strategic shift?
A: Michael McCann explained that the shift from General Contractor Relationships (GCR) to Owner-Direct Relationships (ODR) is a key driver of margin expansion. The company is also evolving its service offerings to enhance margins and plans to leverage acquisitions to scale and introduce new services. These strategies are expected to continue driving EBITDA margin growth.
Q: How is the rental fleet expansion contributing to the company's growth, and what are the future plans for this segment?
A: Michael McCann noted that the $4 million investment in rental equipment is proving successful, with strong deployment observed this summer. The rental fleet is integrated into broader solutions for clients, providing temporary solutions while clients make long-term decisions. The company is optimistic about the rental fleet's role in future growth and plans to evaluate further investments based on its performance.
Q: How does Limbach Holdings plan to manage its SG&A expenses while continuing to invest in growth?
A: Jayme Brooks, CFO, stated that SG&A expenses increased due to recent acquisitions and investments in the ODR business. The company aims to maintain SG&A expenses at 18% to 19% of total revenue for 2024, balancing cost management with strategic investments to drive growth.
Q: What are the updated financial guidance and expectations for Limbach Holdings for the full year 2024?
A: Michael McCann announced an increase in the full-year guidance for adjusted EBITDA to $55 million to $58 million, up from the previous range of $51 million to $55 million. The total revenue guidance has also been raised to $515 million to $535 million, reflecting confidence in the company's strategic transition and growth prospects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
