Building systems solutions provider Limbach Holdings (LMB 1.80%) reported mixed fourth-quarter 2024 earnings on Tuesday, March 10. Adjusted earnings per share (EPS) of $1.15 substantially beat the analyst consensus of $0.79, due to strong operational leverage. Q4 revenue, however, fell short of expectations at $143.7 million (compared to the forecasted $149 million).
Overall, the quarter highlighted strengths in specific strategic areas, while pointing to room for improvement in revenue generation.
| Metric | Q4 2024 | Analysts' Estimate | Q4 2023 | Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS | $1.15 | $0.79 | $0.68 | 69% |
| Revenue | $143.7 million | $149 million | $142.7 million | 0.7% |
| Adj. EBITDA | $20.8 million | N/A | $12.6 million | 66% |
| Gross profit | $43.6 million | N/A | $33.3 million | 31% |
Source: Limbach Holdings. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year. EBITDA = Earnings before interest, taxes, depreciation, and amortization.
Overview of Limbach's Business
Limbach's core business comprises building system solutions which include HVAC (heating, ventilation, and air conditioning), plumbing, and electrical system services. It primarily operates through two segments: Owner Direct Relationships (ODR), where it directly engages with building owners, and General Contractor Relationships (GCR), which involves working on projects commissioned by general contractors. In recent years, its strategic focus has shifted more toward the ODR segment, emphasizing long-term contracts and service agreements directly with building owners.
The company's strategic priorities center around the expansion of the ODR segment. This focus aims to deliver higher profitability and stable revenue streams through direct engagements and service contracts, which have formed a robust foundation for future growth. Key success factors include leveraging strategic acquisitions to boost service offerings and geographic reach, as well as enhancing operational efficiencies to reduce costs and improve margins.
NASDAQ: LMB
Key Data Points
Quarterly Highlights and Strategic Achievements
Limbach's Q4 2024 earnings demonstrated a solid execution of its strategic priorities. The standout performance was in the ODR segment, which saw a 21.4% revenue uptick year over year, reaching $95.5 million and constituting 66.5% of total revenue. This growth highlights increased acceptance of its direct engagement model, aligning well with market needs. This achievement was helped by some strategic acquisitions, such as Acme and Industrial Air, which bolstered ODR revenue by contributing $31.5 million over the year.
The GCR segment made some transformative changes that created challenges. Revenue in this segment fell by 24.8% year over year, but a strategic focus on high-margin projects led to a 34.5% increase in gross profits. This shift underscores an effort to prioritize financial health over mere revenue growth. Operating margins in GCR improved from 15% to 26.9%, illustrating a successful pivot in project execution strategy.
However, the quarter also noted an increase in selling, general, and administrative (SG&A) expenses, rising by 9.8% to $27.4 million. This increase was largely due to acquisition-related costs and payroll increments. Operational challenges stemming from these costs were evident, as they pushed SG&A as a percentage of revenue to 19.1%, up from 17.5% previously.
Looking Ahead
For 2025, Limbach management offers an optimistic outlook, projecting revenue between $610 million and $630 million, and adjusted EBITDA in the range of $78 million to $82 million. These projections reflect a continued commitment to growth strategies, particularly through ODR segment expansion and strategic acquisitions. Management highlighted its plan for acquisitions to contribute up to $10 million in adjusted EBITDA in the upcoming year.
Investors should focus on Limbach's progress in integrating its acquisitions and expanding its ODR footprint. The company's ability to manage integration costs and optimize its operations will be key factors in meeting future expectations. Continued monitoring of the GCR segment will also be important, as Limbach pursues profitability over large-volume projects.
