Limbach Holdings (LMB 1.80%), a provider of building systems, engineering, and construction services, released its Q3 2024 earnings on November 5, showing strong performance in its strategic areas. The company reported adjusted earnings per share of $0.62, and total revenue of $133.9 million. This performance highlights the company's effective shift toward the high-margin Owner Direct Relationships (ODR) segment. Overall, the quarter reflected robust execution of business strategies, despite challenges in other areas.
| Metric | Q3 2024 | Q3 2023 | % Change YoY |
|---|---|---|---|
| Revenue | $133.9 million | $127.8 million | 4.8% |
| Adjusted EPS | $0.62 | — | — |
| ODR Revenue | $93.0 million | $65.8 million | 41.3% |
| GCR Revenue | $40.9 million | $61.9 million | -33.9% |
Source: Analyst estimates for the quarter provided by FactSet.
Overview of Limbach's Business
Limbach Holdings specializes in offering building systems and services across sectors including healthcare, education, and commercial buildings. It focuses on designing, engineering, and maintaining mechanical, electrical, and plumbing systems, aimed directly at building owners through its Owner Direct Relationships (ODR) segment. This approach provides higher margins and recurring revenue, reducing dependence on intermediaries.
The company has recently emphasized growing the ODR segment and making strategic acquisitions to expand its market reach. Success in these areas is critical for ongoing profitability and growth.
Quarterly Highlights
Limbach’s Q3 performance showcased a strong focus on expanding its ODR segment. Revenue from ODR grew by 41.3% to $93.0 million, making up 69.4% of total revenue. This focus led to a gross profit increase of 53.8% in the segment, with margins improving to 31.9%. Such growth underscores the company’s prioritization of high-margin, direct client engagements, distinguishing it from less profitable operations.
NASDAQ: LMB
Key Data Points
Conversely, the General Contractor Relationships (GCR) segment saw a revenue fall of 33.9% to $40.9 million, owing to the company’s deliberate strategy to de-emphasize this lower-margin business. Segment margins contracted from 19.3% to 15.8%, reflecting the focused shift away from less profitable projects.
In managing costs, Limbach faced challenges with selling, general, and administrative (SG&A) expenses increasing by $2.8 million, or 17.7% of revenue, compared to 16.4% previously. This rise was attributed to strategic acquisitions and increased personnel expenses. The acquisition of Kent Island Mechanical expanded its capabilities and market share, particularly in the Washington, D.C. area, aligning with its ODR growth strategy.
Financially, the company reported a significant decrease in net operating cash flow to $4.9 million, compared to $17.2 million in the previous year, due to changes in working capital. Nonetheless, it maintained financial stability with $51.2 million in cash and improved working capital.
Looking Ahead
Limbach Holdings has increased its 2024 revenue guidance to $520 million - $540 million and adjusted EBITDA guidance to $60 million - $63 million.
Investors should closely monitor the company’s performance in ODR and the impact of new acquisitions, as these are expected to build upon its high-margin, recurring revenue framework.
