Company Overview
Limbach Holdings, Inc. (LMB) is a building systems solutions firm that partners with building owners and facilities managers, providing essential mechanical, electrical, and plumbing (MEP) infrastructure services. The company's unique approach of combining engineering expertise with field installation skills allows it to address the operational and capital project needs of its customers across diverse end-markets.
Limbach Holdings, Inc. has a rich history dating back to 1901 when it was founded. Over its more than 120-year history, the company has grown significantly, now employing approximately 1,400 people across 20 offices in the eastern United States. Limbach operates primarily in the Eastern and Midwest regions, leveraging its team members' combined engineering expertise and field installation skills to provide custom solutions that capitalize on its full life-cycle capabilities.
Corporate History
The company underwent a significant transformation on July 20, 2016, when it was formed as a result of a business combination with Limbach Holdings LLC. Prior to this, the company was known as 1347 Capital Corp., a special purpose acquisition company that completed its initial public offering in 2014. This business combination marked Limbach's transition to a publicly traded company, providing it with additional capital and resources to support its growth strategies. However, in the years following the transaction, Limbach faced challenges, including adapting to changes in market conditions and integrating newly acquired businesses.
Business Segments
Limbach operates in two primary segments: Owner Direct Relationships (ODR) and General Contractor Relationships (GCR). In the ODR segment, Limbach performs owner-direct projects and provides maintenance or service on MEP systems, building controls, and specialty contracting. This segment is Limbach's key business initiative, positioning the company as a value-added, indispensable partner to building owners in mission-critical markets. The ODR segment provides a full life-cycle of services, from concept design and engineering through system commissioning and around-the-clock service and maintenance, primarily for existing buildings.
In the GCR segment, the company manages new construction or renovation projects involving primarily MEP services for general contractors or construction managers. Limbach's efforts in this segment focus on improving project execution and profitability by pursuing smaller, shorter-duration opportunities where it can leverage its captive design and engineering services.
Financial Performance
Limbach's financial performance in recent years has been marked by a strategic shift towards the high-margin ODR segment, which accounted for 66.6% of the company's total revenue in 2024, up from 50.7% in 2023. This focus on the ODR business has been a key driver of Limbach's improved profitability, with the company's total gross margin expanding from 23.1% in 2023 to 27.8% in 2024.
In 2024, Limbach delivered record financial results, reporting net income of $30.9 million, or $2.57 per diluted share, compared to $20.8 million, or $1.76 per diluted share, in the prior year. Adjusted net income, which excludes the impact of certain non-recurring items, grew to $43.2 million, or $3.60 per adjusted diluted share, up from $29.2 million, or $2.48 per adjusted diluted share, in 2023. The company's adjusted EBITDA also reached a record $63.7 million in 2024, a 36.1% increase from $46.8 million in the prior year, exceeding the top end of their guidance of $60 million to $63 million.
For the fiscal year ended December 31, 2024, Limbach reported annual revenue of $518.8 million, operating cash flow of $36.8 million, and free cash flow of $29.3 million. In the most recent quarter ended December 31, 2024, the company reported quarterly revenue of $143.7 million and net income of $9.8 million. Revenue growth in the quarter was flat year-over-year, but the increase in quarterly net income was primarily due to higher gross margins driven by a favorable revenue mix shift towards the higher-margin ODR segment.
In the ODR segment, Limbach generated $345.5 million in revenue for the year ended December 31, 2024, representing 66.6% of the company's total consolidated revenue. ODR gross profit was $107.8 million, representing a gross profit margin of 31.2%. The GCR segment generated $173.3 million in revenue, representing 33.4% of total consolidated revenue, with a gross profit of $36.5 million and a gross profit margin of 21.1%.
Market Focus
Limbach's strong financial performance has been underpinned by its focus on mission-critical end-markets, such as healthcare, industrial and manufacturing, data centers, life sciences, higher education, and cultural and entertainment facilities. These verticals have demonstrated resilient demand, often driven by the need for infrastructure upgrades, compliance with evolving regulations, and the ongoing trends of reshoring and nearshoring.
In the healthcare sector, Limbach has emerged as a trusted partner, playing a critical role in ensuring the operational continuity of medical facilities and enabling them to deliver life-saving care. The American Hospital Association estimates that the U.S. healthcare market requires hundreds of billions of dollars in capital investment to address its infrastructure deficiencies, workforce challenges, and technological gaps, positioning Limbach as a key player in this growing market.
The company's second-largest vertical, industrial and manufacturing, has also been a key driver of growth, as Limbach partners with facility owners to support their complex systems and ensure the smooth operation of their manufacturing processes. The potential for increased reshoring and nearshoring to address supply chain resilience further underscores the opportunities in this sector.
Strategic Direction
Limbach's strategic shift towards the ODR segment has not only improved its profitability but also enhanced the predictability and resilience of its revenue stream. By developing long-term partnerships with building owners and becoming an indispensable partner in mission-critical facilities, the company has positioned itself to capture recurring maintenance and service work, as well as capital project opportunities.
The company's acquisition strategy has also played a crucial role in its growth and diversification. Over the past three years, Limbach has completed five strategic acquisitions, including the recent purchases of Consolidated Mechanical in 2024 and Kent Island Mechanical in 2024. These transactions have expanded the company's geographic footprint, enhanced its service capabilities, and strengthened its customer relationships, particularly in the industrial and manufacturing sectors.
Future Outlook
Looking ahead, Limbach expects to continue its momentum, guiding for full-year 2025 revenue in the range of $610 million to $630 million and adjusted EBITDA of $78 million to $82 million. This guidance incorporates two acquisitions completed in 2024 and reflects organic top-line revenue growth of 10% to 15% for the full year. The company expects the first quarter of 2025 to be similar to the first quarter of 2024, with a stronger second half of the year.
Limbach is targeting SG&A expense as a percentage of revenue to be around 18% to 19% in 2025 as they continue to invest in the ODR business. The company is also targeting a free cash flow conversion rate of at least 70% in 2025. Capital expenditures for 2025 are expected to have a run rate of approximately $4 million, excluding an additional $3.5 million investment in rental equipment in the first half of 2025.
This guidance reflects the company's confidence in its ability to further grow its ODR business, drive margin expansion through its evolved service offerings, and leverage its acquisition strategy to scale the enterprise.
Risks and Challenges
However, Limbach is not without its risks. The company operates in a highly competitive industry, faces challenges related to labor shortages and supply chain disruptions, and is subject to various regulatory and compliance requirements. Additionally, the company's reliance on a limited number of large customers in its GCR segment could expose it to potential revenue volatility.
The building systems solutions industry has seen steady demand across key sectors, driven by continued investment in energy efficiency, infrastructure upgrades, and maintenance of aging mechanical systems. However, the industry has faced challenges related to economic uncertainty, labor shortages, and supply chain volatility.
Financial Position
As of December 31, 2024, Limbach had a debt-to-equity ratio of 0.18. The company had $44.9 million in cash and cash equivalents and $35.8 million in available borrowing capacity under its $50 million revolving credit facility. Limbach's current ratio and quick ratio were both 1.46 as of December 31, 2024, indicating a solid liquidity position.
Conclusion
Despite the risks and challenges, Limbach's strategic transformation, its focus on mission-critical end-markets, and its track record of operational excellence position the company well to navigate the evolving built environment landscape. As Limbach continues to deliver on its three-pillar strategy of ODR growth, margin expansion, and strategic acquisitions, it may present an intriguing opportunity for investors seeking exposure to the dynamic building systems solutions market.