Limbach (LMB) 9 May 242024 Q1 Earnings call transcript

Good morning, and welcome to the First Quarter 2024 Limbach Holdings Earnings Conference Call and Webcast. [Operator Instructions] I will now turn the conference over to your host, Julie Kegley of Financial Profiles.

You may begin.

Good morning, and thank you for joining us today to discuss Limbach Holdings' financial results for the first quarter of 2024. Yesterday, Limbach Holdings issued its earnings release and filed its Form 10-Q for the period ended March 31, 2024. as Relations investor website section well on are at as Investor the of documents an presentation updated available limbachinc.com. Both the company's and Officer; the Financial refer investors are me and Michael may to Chief and slides Officer. Brooks, call today's Management Chief Executive President Executive President select on today's to Jayme in presentation call review McCann, its and entirety. With during encourages Vice

questions. then and We will up call for prepared begin open analyst the remarks with

remind you we today's I begin, like to under laws. Before include will securities statements that forward-looking would comments federal

the identified margins be, filings, discussion be statements to are as are comparable results could statements. also that SEC results Limbach's referring statements Actual are of a forward-looking not anticipate materially statements words by call, non-GAAP forward-looking believe, XX-K other Form operating to on such company's facts about Forward-looking these factors such the forward-looking those words statements. expected today's difference such will, measures. or contemplated will compared differ that XX-Q. Please by historical we and material may intend, including improvement as and on that in note from Statements phrases. reports and in in contained some expect, A cause profit is

the Mike the in turn that, found now on McCann. both directly Form in I can of our deck, Relations You comparable be Relations to can with and Investor call been first slide find measures earnings most of non-GAAP Investor SEC. With over and the the which release website had reconciliation X-K investor GAAP these our to the historical filed Limbach's quarter measures in -- furnished presentation will

who to new well as everyone. may Limbach. joining today. you our our as Thank analysts stockholders and Welcome for all be morning, call to Good those

elements the the of strategy. our of remind to everyone quarter, to the get we Before like of I'd key business first highlights

and centers, Two, to building grow require service strategic is industries business from life or operations owner infrastructure. We We science, mechanical, that and fill. First, industrial entertainment. These we are earnings additional and contractor the maintain their best margins those higher to strategy key healthcare, offerings. evolve owners provide vertical with education GCR service whether or new to X offerings; mix relationships, electrical and focus manufacturing, ODR. focused expansion and direct on We through we plumbing we are culture value. mission-critical acquisitions, are shifting relationship cannot three, and general core scaling and way verticals; data tuck-ins, and or geographies uninterrupted services our expanding to are stockholder to believe our upgrade solutions the create building business

to business do mix this more shifting stable, it economically trends. by our we resilient Our that business business a segment is we is building versus the impacted ODR ODR model a So GCR segment, growth see profile. higher-margin, By better segment long-term why way? macroeconomic lower-risk are less the with a

believe to that organic position cash existing not Additionally, and require expanding needs consistent a operating more execution. between and Limbach from less these for reoccurring Owner-Direct volatility capital project flexing budgets. All with Relationships this revenue with our and business while streams attractive opportunities, customer acquisition equals growth and and we grow flows. with service our strong share capital model evolving investment By generate customers we expected does and is this business free offerings, expenditure can market significant

In strategy gross over QX, first XX.X% increased results that by $XX.X XXXX to demonstrate is Our working. profit quarter our QX million.

this of over and EBITDA GCR to business anticipated slower and QX weather and budgets. of quarter favor the to in perspective, increased the which therefore, with market of increased XX.X% in margins. ODR for to to sustain continues last customer gross strategy to due XX.X% in March, this From is call. We year. seasonally we a expect a healthcare momentum year Revenue We intentional began Adjusted to vertical compared the increase our a is gaining highlighted demand seasonally Additionally, rest spending XX.X% of the and $XX.X steady, our to last million. priority. down that stronger year The this slightly, last record operations was healthcare quarters. scale QX a gaining to we margin see down momentum. to spending our are in of starting be top some tends infrastructure result is be our signs customers and

plans our fiscal with XXXX. spend year fact, customers to In we're for working already build

in that Another very vertical industrial Midwest be and We lot being into that performed the the strong is Southeast. market is work continues manufacturing. a of to see

we The seeing expand invest the substantial are to QX grew acquisitions addition in of in X growth. to a made companies organic outerwear and last We lines. continue their as year, business result production

a to accelerate XX% of GCR, revenue quarter, continue to against are shift already to the of the ODR an within increase XX.X% range. well ODR with range We year the XXXX. Keep quarter, for XX%, set XX.X% mix from between that for in mind last comprising we we that QX

our by to increasing addition service expanding we growth, ODR In margins evolving offerings. are through margins

new provide I and our quarter, market in business additional in few share offering just our This next grow provide equipment investment service rental as our cooling existing investing our the and For for to with an grow with last season, entering well. through are HVAC mentioned urgent strategic we example, hold quarter. begin services system customers. opportunity critical to and third to ample expect the existing portable is as see million months There offering over realizing take is now this designed customers approximately customers. We're to we solutions $X revenue to

is and plans. team focused customers' operator needs, but which with is establishing expense presence, starts customer-centric. focus is the strategy on This typically on on-site focused account to building responding daily account also Our capital

relationship recently into capable established engineered key of to need funding we under us projects. and to turn our they to capital funding competitive One local with transition solutions, continuing them thereby customer. of they understand sole-source are long-term build we design our advantages in and arrangement, plan relationship in that Because the with came gaining have providing us competition to project accounts the quickly market to quickly to relative a a the develop capital the an with develop marketplace

progress Industrial We're Industrial acquisitions. the last year, and contributions ACME the growth business. pleased Air and made the on contributed the our we with to from X Turning ODR they've to

through tuck-ins As of earlier, robust both candidates. the business geographic one the a acquisition strategies I mentioned key scaling currently pipeline, acquisitions. expansion have We and strategic

evaluate the fit, the the to find to is critical continue of right which We success strategic to them acquisition.

us return acquisitions the when sheet pursue business to highlights We to Jayme now right Jayme? continue turn extremely we execute we that and it commentary. flow provide will free strong to target. I'll additional to such find before enable selective with the cash about our financial and I be over detailed balance

Thanks, Mike.

Our press company's earnings the quarter of financials. Form first and XX-Q release were XXXX details comprehensive yesterday filed provide and

on So from first the I quarter. the focus will highlights

quarter, to the by $XXX consolidated declined revenue our $XXX due segment. generated focus During to GCR revenue shift as of to $XX.X ODR we million. million to consolidated our QX XX.X% revenue to million of $XX.X million, versus declined in And X.X% revenue expected, while grew XX.X% XXXX. ODR

of revenue gross total million QX of dollars by $XX.X to mix in higher focus million $XX.X adjusted gross in smaller higher mix is As profit shift Mike the profit ODR XX.X% we intentional year. This due and million. as increased margins. gross QX of because gross $X.X shorter our decreased or for with revenue in our decline from gross to revenue, XXXX. indicated, enabled ODR execute QX XX% margins profit margins revenue and quarter, to our from profit $X.X revenue from XX.X% to results. Total $XX million expanded first XXXX. of This GCR In was gross duration XX.X% XX.X% consolidated strategy versus ODR. to and to at profit profit XX.X% gross EBITDA million on lower quarter in up ODR the driving with the increased to contributed gross XX.X% GCR shift the or XX.X% ODR. XX.X% expand driven is last GCR XXXX the XX.X% or continue to projects in of QX

As the gross year. basis was the on XX.X%, mentioned, as quarter for Mike a a prior margin record up in a XX.X% result, consolidated first from

increased $XX.X million XXXX. from During million in of $XX expense approximately to the $X.X million SG&A QX quarter,

from primarily due was percentage our SG&A company XXXX. that was XXXX. a revenue, of increase the acquisitions were of our new expense up in Approximately XX.X% two $X.X XX.X%, As to million million in of $X.X part not QX of

share had be million the as to drive net diluted represents of first quarter per still for of For compared net revenue per This as XXXX. We income QX in to of to in XXX.X% $X.XX million XXXX. does XX% that first spike we first XX.X% our share invest $X to were a X.X% business million EBITDA or diluted for to growth $XX.X XXXX, the X.X% higher $X.X $X.XX income in we awards at Adjusted prices up vested around stock-based in consolidated we in in from period EBITDA a benefit of related when and vesting SG&A growth. XX% are $X.X of targeting compensation XXXX. QX million to the Adjusted margin include quarter $X.X granted. the a up tax current than or XX.X% ODR the expense million, percentage quarter was continue from for was

the difference an inflow than and had end of of of and first in of rental directly rental the remaining QX. Also the the quarter for the in the investment this cash flow. from the as taxes million million equity the of $X to these as the usage for to of operating company the on the open not for company billing cover it open if value. shares equipment did vesting the investing flow of cash our collections quarter. Of QX to million vested. Free during $X.X minus date of elect changes which the market at on of flow part the during activities withhold taxing stock XX.X%, XXXX. had the the by in $XX.X the flow on outflow was the $X.X the XX,XXX paid for market This from reflected of Turning cover cash first prices purchase XX.X% quarter, of approximately EBITDA done create $X million the paid equipment order adjusted last of quarter by we receivables. should withholding capital $X.X we we cash million authorities to timing issued quarter, primarily define in was was This in in $X.X see the share shares in shares to cash quarter is first would the as flow the of was rental driven stockholder cash minus million to QX. versus company in The conversion year. net operations settlement million accounts stock $X.X selling compared Based in Cash expenditures, million cash XXXX, was rather amount, taxes. in quarter which have excluding We equipment, free on awards. of our awards, cash the by investment into common outflow allocation The million XXX.X% working $X to relates cash compared to capital an operating focus capital, was increase

cash to continue free $X a for equipment, which approximately in flow conversion XX% We investment our rate is XXXX, of approximately rental excluding target million.

be XXXX, ODR excluding the the expect rental the $X strategy. to investment equipment to million continue our due to CapEx of for in acceleration We approximately

equivalents million sheet. our at million credit X.X%. balance cash borrowed average our of At in facility QX, to had $XX.X a end cash $XX on and rate interest $XX Turning of we revolving weighted and the million

are Our strategy. to balance sheet investments acquisition necessary our the we remains to positioned well drive strong, ODR and expansion and make

Mike turn closing to it for remarks. I'll Now back

opportunity Thank I'm ahead. you, to in still great is not wallet Jayme. is XXXX start, to future, our but a with XXXX, There for customers. share tremendous about grow and optimistic Limbach's off only very years

to continue towards a building evolve company for We working shift focus the and owners. on directly greater

and in QX them our our customers rest we Because revenue. dedicated revenue to guidance. We the implies to progress added to now have ODR expect ODR an about That's the for are XX% XX% of from increasing top and come. XX% partnering XX%. end of become XX% account and and of with increase we our sales be We to the optimism low embedded growth on with year, total to of the years order staff made in

$XX our million. increasing $XX million from to also EBITDA to $XX up are guidance million, $XX We million to adjusted

$XXX As a range revenue full to million. full year result, EBITDA to we in based expect on to of for adjusted X.X% XX.X% the of guidance our million see XXXX year margin $XXX unchanged total

than more a see think I shift that Limbach mix important story. investors it's as

organically We and from line shift that is are achieved, Once revenue growth, both to acquisitions. transitioning as fast reflect our GCR optimal ODR our as consolidated should mix top mix. possible between optimal and

we We we the value. continue create by to the envision runway have prospects, and by our long stockholder to growth be of excited opportunity significant

[Operator comes question with Instructions] Our Capital. Brown Street from Lake first Rob

Congratulations on all the progress.

On sense of wonder Or the just outlook this you new that? customer driving driven some macro focus of of kind themes this of in give and growth if kind really the the spending? strong there, effort growth, pretty sales ODR your a strategy? catch-up could driven a Is by on is

go Great We're X a comes of which markets key their vertical in working down focus lot is strategy, Rob. the an is really Sure, question. to perspective, facilities mission-critical operations this growth can't on From ODR demand where down. durable. where to our

right to capture next lot There's that the I'm going I able capture. highlight made that's we And or a highlight a couple data very deferred spend. so, sales to been even important did, from want the starting to market. would that well, from still vertical And big year X too. and you, maintenance we've last Tremendous centers. starting of OpEx acquisitions markets of that the us. One investment of capture to now, we're thing capital way the we're is strong. perspective lot just vertical a probably a to I is able opportunity So to projects A Southeast. in into manufacturing different and healthcare. to to is this We been the Midwest out are we've And see the characterize budgets best build that of as been is looking to that tell that comes reenergized. Industrial very

data these of is time the lot get a equipment run old -- a of quick. about So from centers Their perspective. X/X

quickly. on where replaced questions needs lots customers a be lot upgrades relatively to from happen. data new it got that to So of of centers there's We've need

opportunity think for as to going the another further be that's I line. So we down look

definitely those absolutely really infrastructure their I operation. markets our on critical it think where So down comes focus to vertical mission-critical to their is

Great. that And I how this be a CapEx it that? requires? kind think CapEx more you is see that this then highlighted of you to bit. growing? much adder you the year on rental a that than just the more do do maybe Or the will expect for How you that service business, activity nice and Or do and don't

really The rental it's -- base. it's equipment we not base. that heating cooling It's purchased

from So Northeast start warmer the get right now, up the as things to start to to south lead really that equipment in our anticipate move. markets, starting to

the we on-site in it, think So managers. building. equipment, a why you invested reason we're invested these about this if account We've in

projects. in well, add? captured that the too. Jayme, rental business, gap replacement our to you past end-to-end that obviously, to that work a projects, repair equipment, and complete location by so goal middle are in want rental We have of about currently, anything capital filled to more capital offering is providing a from work the time quick a between the it's as capture, is there's and repair But lot repair

we for million paid cash on first Rob, $X actually order. it quarter, but the out this of year. flagged during Yes. million had equipment $X We is the

So you'll of cash see product. as that will we rest most that likely the in in hit receive QX flow that

rental into months, of an million Mike may the at year that, expand equipment. $X reassess get listed the need for that if we is time, there's budget designated opportunity, So this said, our we've as maybe a we further hot fleet. as But and the

more do opportunistic lastly then How I you mature? is for as a you've they And quite active there? know the to Or things M&A expect you things environment, it be and find while. Great. on at Okay. looked

selective is opportunistic. to goal Our be to be and

I highlight, the year, So customer and also Air well. a out last Industrial pipeline X obviously, there's and is robust out penetration. are that the Industrial. ACME excited about definitely there. look very -- Those very I did would working We're which we

company it's overall that deal, get us, for company the the get fit So just able synergy, we're integrate we fits how not with the to the that to necessarily now that into making but right Limbach. from really sure

So still our extremely robust do pipeline. a to so. acquisitions being selective, is goal but We're

comes ROTH Capital [Operator Instructions] question Partners. Our from next Sweeney with Gerry

Rogers on Brandon for Sweeney. is This Gerry

So you of where as you percentage revenue you ODR, where to revenue once When at? margins successfully that shift the -- raised expect reach do you and a see to guys segment are do you think optimized XX% do XX%. the of navigating you to mix, reach And shift? mix optimizing

question. Great

As you from to XX% stated, adjusted we to XX% XX%. XX% to the target

that pieces. as that are definitely a transition doing different couple to is And So in we're we really as how fast possible. make trying of

So resources to managers account really on-site in this sales capture OpEx. year, that we've invested

to into that continue revenue is growth. perspective, project capital additional XXXX, to going investments which make goal Our help especially a will accelerate really from

our beyond a it's So approximately deck, to a long-term from we XX% perspective XX% to pointed in XXXX, getting owner point GCR. direct where

moving in more there's achieve from expansion. we're of fast And as on margin we that order once optimal that. as mix. Obviously, lot So think margin expansion to get a mix the a possible also top I

but offerings, not of just to as service optimal mix also finishing the a ability obviously, mix, having it's that it's there's So both it. pickup, well, our to too. and on the sides think, I introduce And right offerings getting

more me. Awesome. And just one then for

how You have any little there coming pipeline. out? next months bit. discussed acquisitions and pipe the successful But discuss you acquisition you X the to in with the down a can maybe targets X Is X robust you mentioned and Air ideal ACME integration just that months, Industrial

Sure.

bit talk both the done. to we've that just little a of deals So about

so also equipment to opportunity which concentrated components, owner So future fit that an from to hydro, also also the has couple -- also similar that an but is an now, of as space. ACME Between the we're offering very manufacturer. line those equipment well different industrial that base in that right much allows key tell they customers, have cultural Industrial. From expandable, X the direct vertical made industrial would Air a base they market excited have, us have the manufacturing they ability to a in successful and an that installed is deal their have OEM. about to not really opportunity Industrial the A far of have only I types are in components perspective, industrial

the clients down new introduced us line well, future spend So too. several to they've with as

So components those deals X those are cultural of have. expansion key that opportunities, fit, really both customers, the owner-direct

looking line, of want to a robust deals right the the get down plenty deals obviously, to trying be pipeline. done done, we look but to So so. And selective. we're continuing we through to trying opportunities, get We're want we're to --

And at back you. McCann comments. further hand Mike for questions closing Thank I'll there time. this to are no the floor

today for your all participation and you Thank interest continued your Limbach. for in

Thank Profiles. If you reach at out to have a Kegley have additional questions, Financial and day. great you, any Julie please

Thanks. may This All concludes disconnect. today's parties call.