Limbach Holdings Reports Strong Growth Amid Challenges

Limbach Holdings ((LMB)) has held its Q2 earnings call. Read on for the main highlights of the call.

Limbach Holdings’ recent earnings call painted a picture of robust growth tempered by some operational hurdles. The company showcased strong revenue increases, particularly in its high-margin ODR segment, and highlighted successful strategic acquisitions. However, concerns were raised regarding declining GCR revenue, cash flow issues, and reduced ODR margins, indicating short-term challenges despite a promising strategic position for future growth.

Strong Revenue Growth and ODR Strategy Success

Limbach Holdings reported a significant 16.4% increase in total revenue for the second quarter compared to the previous year. This growth was largely driven by a 31.7% rise in ODR revenue, which now constitutes 76.6% of the company’s total revenue. This shift underscores the successful execution of Limbach’s strategy to focus on the high-margin ODR segment.

Record Adjusted EBITDA Growth

The company achieved a record 30% year-over-year growth in adjusted EBITDA, reaching $17.9 million. This increase reflects a margin improvement to 12.6%, up from 11.3% in the prior year, indicating enhanced operational efficiency and profitability.

Successful Strategic Acquisition

Limbach completed the acquisition of Pioneer Power, marking the largest acquisition in the company’s history. This move expands Limbach’s presence in the Upper Midwest and strengthens its service offerings, positioning the company for further growth.

Increase in Gross Profit and Margins

Gross profit saw an 18.9% increase, with total gross margin rising to 28% from 27.4%. This improvement was driven by the higher-margin ODR revenue, reinforcing the company’s strategic focus on this segment.

Expansion of Sales Team

To support its growth ambitions, Limbach expanded its sales organization by adding 40 new salespeople and hiring a new Senior VP of Sales. This expansion aims to drive further growth in national accounts and enhance the company’s market reach.

Decline in GCR Revenue

As part of its strategic shift towards ODR, Limbach experienced a 15.7% decline in GCR revenue. While this may impact short-term revenue stability, it aligns with the company’s long-term strategic objectives.

Challenges in Cash Flow from Operations

Operating cash inflow for the second quarter was significantly down to $2 million from $16.5 million the previous year. This decline was primarily attributed to the timing of billings, posing a short-term operational challenge.

Lower ODR Segment Margins

The ODR segment experienced a decrease in gross margins to 29% from 30.6%. This was due to non-recurring project write-ups from the previous period, highlighting a temporary dip in profitability.

Forward-Looking Guidance

Limbach Holdings revised its 2025 guidance, projecting full-year revenue between $650 million and $680 million and adjusted EBITDA in the range of $80 million to $86 million. The company aims to maintain ODR revenue between 70% and 80% of total revenue. Strategic initiatives, including scaling the ODR business and acquisitions like Pioneer Power, are expected to drive long-term growth, with a focus on diversification and reducing market dependency.

In summary, Limbach Holdings’ earnings call highlighted a period of strong revenue and EBITDA growth, driven by strategic shifts towards the ODR segment and successful acquisitions. Despite facing short-term challenges such as declining GCR revenue and cash flow issues, the company is strategically positioned for future growth, with a clear focus on expanding its market presence and service offerings.