Limbach Q1 2025 Earnings Call Transcript

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May 6, 2025
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Operator

Good morning, and welcome to the First Quarter '20 '20 '5 Limbach Holdings, Inc. Earnings Conference Call and Webcast. All participants will be in listen only mode. I will now turn the conference over to your host, Julie Kegley of Financial Profiles. You may begin.

Julie Kegley
SVP at Financial Profiles, Inc

Good morning and thank you for joining us today to discuss Limbach Holdings financial results for the first quarter twenty twenty five. Yesterday, Limbach issued its earnings release and filed its Form 10 Q for the period ended 03/31/2025. Both documents as well as an updated investor presentation are available on the Investor Relations section of the company's website at limbachinc.com. Management may refer to select slides during today's call and encourages investors to review the presentation in its entirety. On today's call are Michael McCann, President and Chief Executive Officer and Jamie Brooks, Executive Vice President and Chief Financial Officer.

Julie Kegley
SVP at Financial Profiles, Inc

We will begin with prepared remarks and then open the call to questions. Before we begin, I would like to remind you that today's comments will include forward looking statements under federal securities laws. Forward looking statements by words such as will, be, intend, believe, expect, anticipate or other comparable words and phrases. Statements that are not historical facts, such as statements about expected financial performance, are also forward looking statements. Actual results may differ materially from those contemplated by such forward looking statements.

Julie Kegley
SVP at Financial Profiles, Inc

A discussion of the factors that could cause a material difference in the company's results compared to these forward looking statements is contained in Limbach's SEC filings, including reports on Form 10 ks and 10 Q. Please note that on today's call, we will be referring to non GAAP measures. You can find the reconciliation of these non GAAP measures to the most directly comparable GAAP measures in our first quarter twenty twenty five earnings release and in our investor presentation, both of which can be found on Limbach's Investor Relations website and have been furnished in the Form eight ks filed with the SEC. With that, I will now turn the call over to President and CEO, Mike McCann.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Good morning, and welcome to our stockholders, analysts and all interested investors. Thank you for joining us today. Lumbach is a trusted partner for delivering mission critical services that supported buildings with important systems. We specialize in existing facilities by revitalizing and maintaining building systems to ensure these systems perform when it matters most. When these systems don't function or don't function as intended, our customers are shut down or unable to meet commitments made to their own customers.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

We provide cost effective, innovative and dependable services to keep our customers in business. Our unique ODR model is designed to withstand macroeconomic cycles and headwinds, and allows us to focus on executing our growth strategy. Working directly for building owners allows us to build long standing relationships as we strive to be an indispensable partner by providing on demand repair work and long term solutions to keep facilities up and running. Since we implemented the Owner Direct strategy five years ago, revenue from the ODR segment has increased from less than 21% of total revenue in 2019 to 66.6% of total revenue for 2024, '60 '7 point '9 percent in the first quarter of twenty twenty five, and we project to be between 7080% for full year 2025. This strategy is responsible for improving the company's risk profile, driving margin expansion and growing earnings.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

The progress we've made towards this shift continues to be reflected in our results. Compared to Q1 of twenty twenty four, Q1 '20 '20 '5 total revenue grew 11.9%, ODR revenue rose 21.7%, gross profit expanded by 18.1%, and adjusted EBITDA increased 26.5. Tim will go into more detail on these numbers shortly, but we're proud of the continued momentum we've built. This strong performance reflects more than just financial success. As an indication, our business strategy is repeatable with geographic expansion, sustainable through different economic environments and gaining momentum.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

To support continued ODR growth, in the past year, we've added approximately 40 new professionals to our sales organization, accounting for approximately one third of the sales team. This investment is an important step in the continued evolution of our relationship with our customers. It's important that we understand our customers' facilities and anticipate the work needed to keep their critical facilities running to support their business. And that requires us to be present and in front of decision makers consistently so that we can develop and maintain long term reoccurring partnerships across operations, maintenance and capital projects. In fact, the majority of our sales activity is focused on existing customers with large established facilities that require ongoing maintenance upgrades and system optimization.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

We believe we currently hold only a small share of the total work needed to keep these complex operations running efficiently. Importantly, our growth is not dependent on the construction of new facilities, instead is driven by the continuous needs of our longstanding clients. These relationships represent the most fertile ground for organic expansion. Our dedicated account teams are focusing on deepening them through exceptional service, responsiveness and practical high impact solutions. We've experienced typical seasonality in Q1, primarily from weather and annual budget cycles, but we've gained meaningful momentum in March, which has carried into the second quarter.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

We're capitalizing on the momentum as customers improve budgets, and our key markets, especially healthcare, begin to ramp up investment for overdue infrastructure upgrades. The second pillar of our transformation strategy is to expand customer offerings to meet customer demand and pursue high margin opportunities. In Q1, we added an additional $2,000,000 to our climate control rental equipment fleet to position ourselves to meet increased demand as temperatures rise. This is a key growth lever, which was not fully operational in Q1 of last year, and just one example how we're innovating beyond traditional offerings. Big initiative for 2025 is to transition our strategic customer relationships from a reactive to a proactive approach, with the goal to help influence and coauthor customer budgets by the end of the year.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

This will allow us to strengthen our relationships and create more predictability for our sales pipeline. In order to achieve this objective, we're focused on collecting data from asset repair history, utility bills and facility assessments, which we can analyze and present back as solutions to our customers. To undertake this endeavor, each branch has identified their top customers based on specific criteria and has started the assessment process. Each one is at a different stage based on the customer relationship, but we've already started to see how these assessments can drive our relationships with our customers and impact our business. After completing assessment for New England based hospital, we provided them with a compelling case to replace both the HVAC system and equipment that feeds their operating rooms.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Once we presented the customer with the energy and asset repair savings, they proceeded with the replacement. Looking ahead, the opportunity to collect and analyze this data at scale represents a major inflection point for our business. As our dataset grows, so does our ability to surface patterns, benchmark performance, and identify opportunities that would otherwise remain hidden. This capability not only positions us as a more strategic partner to our customers, but also has the potential to create a powerful competitive advantage that compounds over time. I'd also like to quickly address the uncertainty around tariffs.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Tariffs have been a topic of conversation in the broader market, but their effect in our business has been so far neutral. What we are seeing is customers accelerating their purchasing decisions to lock in pricing due to ongoing tariff uncertainty. Our model, especially our ODR segment work, is built to respond quickly to market dynamics and avoid macroeconomic volatility. We perform quick hitting work with most projects completed on a three or four month timeline, giving us the ability to deliver consistent value even in times of uncertainty. This nimbleness and agility enables us to focus on the best solutions for our customers and gives us an advantage over traditional contracting models that focus on new construction that lock in pricing at time of bid.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Contractors often wait months or even years to recover cost increases for materials. We've also seen interesting developments in the M and A market over the past nine months. For several years now, there's been significant consolidation in the broader mechanical services industry, much of which has been driven by private equity investors. That activity has been concentrated in less sophisticated, less technical, complex end markets. Those aren't general areas in which we're interested, but the increased activity overall has repercussions and has positively impacted our competitive position.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

We've been patient and disciplined, have remained focused on acquiring great businesses with great cultures. They're aligned with our focus on owner direct mission critical customers. We believe we've been rewarded for that patience and discipline. We're also been working to further build out our brand and reputation as fair, transparent and dependable acquirers of world class contractors. We strive to become the preferred home for outstanding family owned and operated businesses.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

In recent months, we've seen evidence that our approach is delivering results and believe that we're developing and assessing opportunities that are unavailable to other potential buyers. We see this trend continuing and are excited about the pipeline we've built. We're making solid progress on recent acquisition integrations and are exploring additional opportunities aligned with our core capabilities and expand our geographic footprint. We consistently work on our M and A pipeline to ensure ample time for due diligence and are well positioned from a capital perspective. We're patient, we're going to be able to execute the right deals at the right time.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

We currently operate in approximately 20 metropolitan statistical areas MSAs, with a well established presence across core markets. Looking ahead, we have identified an additional 20 to 30 MSAs, primarily along the East Coast and throughout the Midwest that represent attractive expansion opportunities. Given our proven model and operational capabilities, we are well positioned to capitalize in these markets. We remain confident based on our current visibility to deliver our full year guidance targets of $610,000,000 to $630,000,000 in revenue and adjusted EBITDA in the range of 78,000,000 to $82,000,000 We're confident in our team's ability to deliver. In closing, we're off to a strong start this year, driven by our disciplined strategy, operational execution and our relentless focus on serving our customers.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Thank you for your continued support and confidence in Limbach Holdings. Now, I'll turn it over to Jamie to walk through the financials.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

Thank you, Mike. Our Form 10 Q and earnings press release filed yesterday provide comprehensive details of our financial results. So I will focus on the highlights of the first quarter. All comparisons are first quarter twenty twenty five versus first quarter twenty twenty four unless otherwise noted. In the first quarter, we generated total revenue of $133,100,000 compared to $119,000,000 in 2024.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

Total revenue growth was 11.9%, while ODR revenue grew 21.7% and GCR revenue declined 4.5%. As we have said, the GCR revenue decline is intentional as we execute our mix shift strategy towards ODR. ODR revenue accounted for 67.9% of total revenue for the first quarter, up from 62.4% in Q1 twenty twenty four. Total gross profit for the quarter increased 18.1% from $31,100,000 to $36,700,000 reflecting our focus on growing our ODR segment. Total gross margin on a consolidated basis for the quarter was 27.6%, up from 26.1% in 2024, driven by the combination of higher margin ODR revenue, higher quality GCR work and contribution from acquisitions.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

ODR gross profit comprised 71.2% of the total gross profit dollars or $26,200,000 ODR gross profit increased $4,000,000 or 18%, driven by higher revenue with ODR gross margins of 28.9%, slightly down from 29.8% in Q1 twenty twenty four. The lower ODR gross margin percentage in Q1 twenty twenty five was primarily because of $2,000,000 of gross profit write ups in the ODR segment during Q1 twenty twenty four. GCR gross profit increased 1,600,000 or 18.3% due to our more selective approach to projects. Our focus on higher quality projects increased our GCR gross margins to 24.7% from 20% in the first quarter of last year. SG and A expense for the first quarter was $26,500,000 an increase of approximately $3,600,000 from $22,900,000 As a percentage of revenue, SG and A expense was 19.9%, up from 19.2% in the same period last year.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

This increase includes SG and A associated with Kent Island and Consolidated Mechanical, which were not acquired entities of the company during the three months ended 03/31/2024. We expect SG and A for 2025 to be in the target range of 18% to 19% of total revenue due to our ongoing investment in the growing of our ODR business. Adjusted EBITDA for the quarter was $14,900,000 up 26.5% from $11,800,000 in Q1 twenty twenty four. Adjusted EBITDA margin was 11.2% compared to 9.9% in Q1 of last year. Net income for the quarter grew 34.6% from $7,600,000 to a record $10,200,000 and earnings per diluted share grew 32.8 from $0.64 to $0.85 Adjusted net income grew 38.9% from $9,700,000 to $13,500,000 and adjusted earnings per diluted share grew 36.6% from $0.82 to $1.12 Turning to cash flow.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

Our operating cash inflow during the first quarter was $2,200,000 compared to a $3,900,000 operating cash outflow during the first quarter of last year, representing a $6,200,000 improvement. Free cash flow, defined as cash flow from operating activities less changes in working capital and capital expenditures, excluding our investment in additional rental equipment for the first quarter was $15,000,000 compared to $11,800,000 in Q1 last year, representing a $3,300,000 improvement. The free cash flow conversion of adjusted EBITDA for the quarter was 101.1% versus 100.3% last year. For full year 2025, we are targeting a free cash flow conversion rate of at least 75% and expect CapEx to have a run rate of approximately $4,000,000 primarily due to the acceleration of our ODR strategy. This amount excludes an additional investment of $3,500,000 in rental equipment for 2025, of which $2,000,000 occurred in the first quarter.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

Turning to our balance sheet. As of March 31, we had $38,100,000 in cash and cash equivalents and total debt of $27,500,000 which includes $10,000,000 borrowed on our revolving credit facility at a hedge rate of 5.72%. Our balance sheet remains strong, and we are well positioned to support our strategy of generating ODR growth and margin expansion to drive significant long term value for our stockholders. In addition, we will continue to utilize our balance sheet to support our strategy by providing the capital needed for opportunistic acquisitions and other growth initiatives. That concludes our prepared remarks.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

I'll now turn the call back to the operator to begin Q and A.

Operator

Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Rob Brown with Lake Street Capital. Please proceed with your question.

Rob Brown
Founding Partner & Senior Research Analyst at Lake Street Capital Markets, LLC

Good morning. Congratulations on a nice quarter.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Good morning, Rob.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

Thanks, Rob.

Rob Brown
Founding Partner & Senior Research Analyst at Lake Street Capital Markets, LLC

On the healthcare market, you talked about some kind of rebound there and recovery in activity. Could you just give us a sense of where that market's been and how you see it trending?

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Yes. So the health care vertical market has definitely been our key vertical market that we've really focused on, I would say, not just this year, but the past few years. What we like about it is, the relative stability from that perspective. There's been lots of deferred maintenance that's really happened over the last four or five years, I think, coming out of 2020 and 2021. So a lot of times, hospital get to the point where that deferred maintenance needs to be dealt with, and they no longer are in the quick repair mode, and they need to make plans on their long term capital planning from that perspective.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

So I think going to this year, we've definitely started to see some of our key customers realize, like, I really need to start planning in the future because I'm building up a short term expense. So we expect it to be a slow ramp up, but we like the stability, and we've really embedded ourselves in our strategy. It really works well in that vertical market.

Rob Brown
Founding Partner & Senior Research Analyst at Lake Street Capital Markets, LLC

Okay. Great. Thank you. And then you talked a little bit about some pull forward on projects as customers looked at maybe tariff risk. But how do you see that?

Rob Brown
Founding Partner & Senior Research Analyst at Lake Street Capital Markets, LLC

Or how much of it do you think was pulled forward? And I guess what's the risk on kind of equipment prices with tariffs at this point?

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Yes. So I think the one thing we definitely appreciate this year is going it's a lot tougher to sell in our model. Like every there's not like a location has one or two projects that make up all of their revenue for the year. So a lot tougher from that perspective. But I think the thing that really helps us is we do have things that pop up that are tariffs or even I think of other items that are macroeconomic related.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Our ability to be nimble and quick and pass cost along, is something that I think is beneficial even though tariffs essentially have been neutral to us. What I think we've seen from customers is, the need to make the decision. They can't wait two or three months later because first off, our price won't be valid at that point. But secondly, things could change and the dynamics could change, the pricing could change. So I think that's one thing that we've really tried to stress to our customers is, I'm giving you some I'm giving you a proposal.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

You need to act quickly on it. You need to make sure that you're ready to get funded or not. And I think that's the real conversation we've had with a lot of our customers. And I think it's a good conversation because it allows us to be as proactive as possible and to make sure that there's no surprises between either. But definitely, the quick hitting nature of our work, I think, allows us to have those conversations with our customers and not be caught up in super long term projects where it's tough to deal with drastic material increases.

Rob Brown
Founding Partner & Senior Research Analyst at Lake Street Capital Markets, LLC

Great. Thank you. I'll turn it over.

Operator

Thank you. Our next question comes from the line of Chris Moore with CJS Securities. Please proceed with your question.

Chris Moore
Senior Analyst at CJS Securities

Hey, good morning guys. Thanks for taking a couple. Maybe I'll focus on ODR to begin with. Obviously the goal is generate more and more revenue from an ODR client. Only a portion of the ODR clients evolve to the point where they're kind of more of that partner, the relationship evolves from just OpEx to include things like CapEx.

Chris Moore
Senior Analyst at CJS Securities

Maybe a few questions here. I'm just trying to understand, when does an account manager get placed at an ODR client when you're still trying to determine if the customer could be a long term partner or after you come to the conclusion that that long term opportunity is actually there?

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Yes. So we've learned a lot, I would say, the last few years. Just because it's a building with a lot of square footage at the hospital doesn't necessarily mean that, that account is positioned to accept that on-site account manager. So we definitely research the facility, what's the spending patterns, what's the opportunity, not just what we've done short term, but we've done long term. We have a sales rep that makes sure that we have traction.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

So we're not putting an on-site account manager where we haven't seen revenue and gross profit ultimately fall through. So it's a combination of getting traction and also doing our homework and realizing that, that account can accept that type of attention. So those are really two things that we've learned that have been important for success.

Chris Moore
Senior Analyst at CJS Securities

Got it. And is there any way to kind of put some kind of percentage around? Just trying to understand how many ODR clients you work with now and what percentage of those are at that stage where you have realistically said this is kind of partnership material?

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Yes. So each branch, we've really asked them to focus on really five core strategic customers. Some branches have five that are set up, some of them have two or three. So usually, they're in some pattern about that as well, too. I think the other thing, too, that we had in our deck was kind of this relationship between a local and national perspective.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

So our goal over time is to connect the dots, and that's where I really feel like it's a big opportunity. So one of the just as an example, one of our customers is a national health care provider. We work with them at three locations: Ohio, Philadelphia and in South Florida. We've been working from an OpEx perspective, somewhat from a CapEx perspective. But we're now starting to connect the dots together.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

So we can take a local relationship and turn that into a national relationship. And I think that's where we're going to see, again, continued acceleration. So each branch is focused on their top five. They're in some range of that, but there's also, I think, an added opportunity even once we gain some level of penetration from that perspective. Also, we'll get it from a national perspective as well, too.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

So back to your other question. We really carefully pick these accounts. We're very we work together to make sure that it's not just going to be a local impact, but it could be a national impact, it be of a greater scale as well too.

Chris Moore
Senior Analyst at CJS Securities

Very helpful. And maybe just the last one for me. The GCR gross margin was certainly higher than I was modeling 24.7% versus 20% year over year. You said that was kind of more selective projects. Given the current environment, lots of uncertainty, is how likely or how difficult is it to keep the gross margin on GCR above 20%, say, over the next year or so?

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Yes. We're continuing to guide to 28% between the two. So depending on the quarter, there may be certain projects that finish or not. It's just it depends on the mix. Jamie, anything you want to add?

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

Yes. It's really going to be mixed within that specific quarter. So really, yes, the target, as Mike said, is 28% to 29% blended for growth for the full year because there really can be the ebb and flow of that margin depending on the mix within any quarter.

Chris Moore
Senior Analyst at CJS Securities

Got it. That's helpful, guys. I'll jump back in line.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

Thank you, Chris.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Thank you.

Operator

Thank you. Our next question comes from the line of Gerry Sweeney with ROTH Capital Partners LLC. Please proceed with your question.

Gerry Sweeney
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Good morning, Jamie and Mike. Thanks for taking my call.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Good morning.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

Good morning.

Gerry Sweeney
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Congratulations on a great quarter. Mike, I think you highlighted 40 new salespeople. I apologize, maybe out of the course of last year or in the last couple of quarters. That sounds and I want to double check, it sounded like it was about a 30% increase on the sales side. But secondarily, I was wondering if you could give a little bit more detail on are those salespeople, account managers?

Gerry Sweeney
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

And how do you look at them ramping up and sort of hitting their full stride on the sales opportunity post hiring?

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Yes. So this is about 40, it's about a third of our sales staff. So the last couple of years, we've added somewhere in the ballpark of that number. So if you circle back to like 2021 and 2022, we didn't have a lot of salespeople. It was a very different model.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

So every year and I think in some sense, is why our SG and A hasn't been leveraged yet is we have to continue to invest. Those sales reps and on-site account managers are critically important to make sure that we grow our owner direct. Back to your the other piece of your question. The vast majority of them are the on-site account managers that are working that OpEx. There's a small smattering of sales reps.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

And then there's also account execs as well too, which are new that we've hired And their goal is to really penetrate from a CapEx perspective. So take that the relationship that the On-site account manager has built on the FX side and as well, really position and make sure that we're capturing from a capital CapEx perspective as well, too. But of course, there's a bit of a ramp up period for each one of these. A lot of it depends on what account they are.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

It depends on the role that they're playing. But in some sense, it's a similar pattern that we've had the last couple of years.

Gerry Sweeney
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Got it. And then speaking about connecting the dots on your sort of, I guess, your geographic strategy, right, following some of your larger accounts to maybe additional MSAs. If you were to go into a new MSA, would you following and say following a large account, would you go in there organically or would you prefer to make a small acquisition to sort of jump start things in that new area?

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Yes. So there are just a couple of different ways that we would attack it. So we do have some relationships, especially on the national health care side. We will do work outside of a branch location. A lot of times, that's a program management type deal, who are managing a capital program for them.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

So we don't necessarily have boots on the ground. But the real opportunity for us is, just as what you said, if we really make sure from an account perspective, we look to see what that kind of overlap there is. These national customers, what's the breadth and footprint? So if we do buy a company and we have boots on the ground, now here's an opportunity, not just to buy a great company but also to leverage these national relationships as well, too. So just from our MAP perspective, there's lots of white space on there.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

And then we are always kind of overlapping some of our national customers as well too, so we can buy a company and then we can give them some acceleration from a revenue perspective from a national account as well too. That's really, I think, where we get a great benefit out of it.

Gerry Sweeney
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Got it. What about taking aside following new customers looking at there's 20 to 30 MSAs that I think I don't my words, not yours, targeted. How would you enter into those markets separately? I mean, acquisition? Or would you ever look at going into any market from an organic standpoint?

Michael McCann
Michael McCann
Director, President & CEO at Limbach

We've done organic starts before. As an example, South Florida was an organic start. A lot of it comes down to making sure that we have the right leader, we have the right team. So occasionally, we will do that. I would say the majority of what we do will come from an acquisition as well too.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

So that really accelerates it. So if we're going to go from a new start perspective, it really takes time, and we've learned from that. So I would say for the majority of those 20 to 30 MSAs that we referenced in the prepared remarks, a lot of those will come from an acquisition perspective. We just get the scale on the resources and it really lets us to get going pretty a lot quicker.

Gerry Sweeney
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Got it. All right. I appreciate it. I'll jump back in queue. Thanks guys.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Thank you.

Operator

Thank you. Our next question comes from the line of Brian Roffey with Stifel. Please proceed with your question.

Brian Brophy
Brian Brophy
Associate Vice President at Stifel Financial

Thanks. Good morning, everybody. Congrats on a nice quarter.

Jayme Brooks
Jayme Brooks
Executive VP & CFO at Limbach

Thank you. Good morning.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Good morning.

Brian Brophy
Brian Brophy
Associate Vice President at Stifel Financial

Good morning. So you called out an acceleration in March in your comments. Can you talk about the significance of that? Was that acceleration more than seasonally normal this year? And just any more color on how that continued into April?

Brian Brophy
Brian Brophy
Associate Vice President at Stifel Financial

Thanks.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Yes. So as we've referenced before, there's definitely seasonality to it. I think there's a couple of things that kind of result in that. One is, every year, we've had a greater owner direct mix. And this year, we continue to have that.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

So that always leads us to being to having revenue build throughout the year. I think March was really helped us from that perspective. And I think part of it seasonality, part of it is the sales reps that we have and account managers that we brought on. It's really a combination of those two together. But, as always, we expect there to be a ramp up throughout the year.

Brian Brophy
Brian Brophy
Associate Vice President at Stifel Financial

Okay. And maybe this is related. There's been some discussion from some of the HVAC OEMs and distributors regarding some of the disruption early this year to a refrigerant change out. Curious your perspective on that and if you saw any impact from that at all this year? Yes.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

It's we have. It depends on what the equipment, what the project is. That is a reason, I think, for somebody to make a decision. So it's typically been of help to us. So a lot of times, too, it just depends from a customer perspective.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Are they in this do they have a reason to make that ultimate equipment repair? So it could be from different refrigerant changes. It could just be in their cycle. A lot of times, from a customer perspective, it's just a matter of when have they wrapped up a big enough bill from an OpEx perspective, along with a number of other factors, which may be things like refrigerant switch outs that says, finally, we need to make a decision. It's a decision point, I would say more or less from our customer perspective.

Brian Brophy
Brian Brophy
Associate Vice President at Stifel Financial

Okay. And then, one more for me. I wanted to kind of follow-up on some of your comments, on private equity competition on the M and A side. I think historically you've talked about doing two to three deals, tuck in deals a year. Is that still a good way to kind of think about the M and A cadence Or given the competitiveness on the M and A side, maybe you're thinking something different today?

Brian Brophy
Brian Brophy
Associate Vice President at Stifel Financial

Thanks.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Yes. No. So we're looking to buy 8,000,000 to $10,000,000 of adjusted EBITDA. So it's interesting from a private equity perspective. I think what that does is ultimately really shows people that are selling their business just the differentiation between maybe going down that route versus the Limbach route.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

So I think the saturation in the market has allowed us to differentiate ourselves. And I think what it really comes down to is our approach is just different. We're going to be patient, diligent. We're going to take our time. We're really focused not on just the deal itself, but what the deal is going to look like over the long term.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

And then how can we fit them into our mold, get them on our common strategic platform. So I think we've just realized over time that, it's a big differentiator for us. And we definitely feel like, we're a unique option. And in some sense, I think it's opened up doors where maybe it wouldn't have if we had more of a common approach from an acquisition perspective.

Brian Brophy
Brian Brophy
Associate Vice President at Stifel Financial

Yes, that's really helpful. I will pass it on. Thank you.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Thank you.

Operator

Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to Mike McCann for closing remarks.

Michael McCann
Michael McCann
Director, President & CEO at Limbach

Thank you for listening today and for your continued interest in Limbach. We look forward to seeing many of you at the Oppenheimer Virtual Industrial Conference on May 8, the Bank of America Industrial Conference in New York on May 14 and the Stifel Cross Sector Conference in Boston on June. Have a great rest of your day. Thank you.

Operator

And this concludes this conference. You may disconnect your lines at this time. Thank you for your participation.

Executives
Analysts
    • Julie Kegley
      SVP at Financial Profiles, Inc
    • Rob Brown
      Founding Partner & Senior Research Analyst at Lake Street Capital Markets, LLC
    • Chris Moore
      Senior Analyst at CJS Securities
    • Gerry Sweeney
      Managing Director, Senior Research Analyst at Roth Capital Partners, LLC
    • Brian Brophy
      Associate Vice President at Stifel Financial
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Key Takeaways

  • Since 2019, the company’s Owner Direct Repair (ODR) model has grown to represent 67.9% of Q1 2025 revenue, up from 62.4% in Q1 2024, with ODR revenues rising 21.7% year-over-year and projected to reach 70–80% in 2025, improving margins and reducing business risk.
  • First quarter 2025 results featured $133.1 million in revenue (up 11.9% YoY), gross profit of $36.7 million (+18.1%), adjusted EBITDA of $14.9 million (+26.5%) and record net income of $10.2 million (+34.6%), with free cash flow of $15 million (+27%).
  • The company added about 40 new sales professionals—roughly one-third of its sales team—focused on deepening existing relationships by embedding on-site account managers and shifting from reactive repairs to proactive, data-driven facility assessments that support both OpEx and CapEx engagements.
  • Limbach maintains a disciplined M&A strategy targeting businesses that generate $8–10 million in EBITDA, aiming to expand into 20–30 new metropolitan markets via opportunistic acquisitions, supported by a strong balance sheet ($38.1 million cash vs. $27.5 million debt).
  • Management is broadening service offerings—such as a $2 million investment in climate control rental equipment—and leveraging its nimble model to mitigate tariff uncertainty through rapid, 3–4-month projects that pass cost changes directly to customers.
AI Generated. May Contain Errors.
Earnings Conference Call
Limbach Q1 2025
00:00 / 00:00

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