Limbach Holdings ((LMB)) has held its Q4 earnings call. Read on for the main highlights of the call.
Limbach Holdings’ recent earnings call painted a picture of a company navigating both successes and challenges. The sentiment was largely positive, driven by a strategic shift towards high-margin owner direct revenue, which has significantly bolstered gross margins and financial performance. However, concerns were raised over flat overall revenue growth, increased SG&A expenses, and a decline in operating cash flow.
Shift to Owner Direct Revenue
In 2024, Limbach Holdings made a strategic pivot towards Owner Direct Revenue (ODR), which accounted for 67% of total revenue and contributed 75% of total gross profit dollars. This segment saw a remarkable growth of 31.9%, underscoring the company’s focus on high-margin, sustainable business practices.
Gross Margin Improvement
The company’s gross margin saw a significant increase, rising to 27.8% in 2024 from 23.1% in 2023. This improvement was largely attributed to the higher-margin ODR revenue and quality work in the General Contractor Revenue (GCR) segment.
Strategic Acquisitions
Limbach Holdings completed two strategic acquisitions in 2024, which are expected to contribute approximately $6 million to adjusted EBITDA in 2025. These acquisitions are set to expand the company’s capabilities, particularly in the industrial manufacturing sector.
Strong Financial Performance
The company reported a robust financial performance, with net income growing by 48.8% to $30.9 million and adjusted EBITDA increasing by 36.1% to $63.7 million, surpassing the top end of the 2024 adjusted EBITDA guidance.
Expansion in Healthcare Vertical
Healthcare has emerged as Limbach’s largest vertical, presenting significant growth opportunities due to the increasing demand for infrastructure upgrades and maintenance.
Flat Overall Revenue Growth
Despite the successes, total revenue growth remained nearly flat at 0.5% in 2024. This was primarily due to a 31.9% decline in the GCR segment, reflecting the company’s strategic shift.
Increased SG&A Expenses
SG&A expenses rose to $97.2 million, up from $87.4 million in 2023. This increase was driven by higher payroll and incentive-related expenses, impacting overall profitability.
Decline in Operating Cash Flow
Operating cash flow decreased by 35.9% to $36.8 million, influenced by timing differences in certain accounts receivable, posing a challenge for the company.
Forward-Looking Guidance
Looking ahead, Limbach Holdings provided guidance for 2025, projecting organic revenue growth of 10% to 15% and total revenue between $610 million and $630 million. The company plans to maintain its strategic focus on expanding the ODR segment, aiming for an 80/20 revenue mix between ODR and GCR to drive higher margins and sustainable growth.
In summary, Limbach Holdings’ earnings call highlighted a successful strategic shift towards high-margin revenue streams, resulting in strong financial performance. However, challenges such as flat revenue growth and increased expenses remain. The company’s forward-looking guidance suggests a continued focus on strategic growth and margin improvement, setting a positive tone for the future.