Core Viewpoint - Limbach Holdings, Inc. (LMB) is transitioning from a low-margin contractor model to a higher-margin building systems partner model, indicating a positive shift in its business strategy [1]. Company Summary - Limbach Holdings is focusing on enhancing its profit margins by moving away from low-margin contracting activities [1]. - The company is positioning itself as a building systems partner, which is expected to yield better financial performance [1]. Industry Context - The shift in business model reflects broader trends in the construction and building systems industry, where companies are increasingly seeking higher-margin opportunities [1].

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We came across a bearish thesis on Limbach Holdings, Inc. on Valueinvestorsclub.com by Glory_Warriors. In this article, we will summarize the bulls’ thesis on LMB. Limbach Holdings, Inc.'s share was trading at $69.50 as of December 1st. LMB’s trailing and forward P/E were 23.35 and 15.87 respectively according to Yahoo Finance. HVAC, Aircondition, AC Photo by Taylor Vick on Unsplash Limbach is an HVAC, plumbing, and electrical contractor focused on non-residential buildings, whose stock has surged from ...

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $184.6 million, a 37.8% increase from $133.9 million in Q3 2024 [30] - ODR revenue grew 52% to $141.4 million, with 39.8% from acquisitions and 12.2% organic growth [30] - GCR revenue increased 5.6% to $43.2 million, with a 25.1% growth from acquisitions but a 19.5% organic revenue decrease [30] - Total gross profit rose 23.7% from $36.1 million to $44.7 million, while total gross margin decreased to 24.2% from 27% [31] - Net income increased 17.4% from $7.5 million to $8.8 million, with adjusted earnings per diluted share growing 15.4% from $0.91 to $1.05 [33] Business Line Data and Key Metrics Changes - ODR revenue accounted for 76.6% of total revenue in Q3 2025, up from 69.4% in Q3 2024 [30] - ODR gross profit comprised approximately 80% of total gross profit dollars, increasing by $6 million or 20.3% [31] - GCR gross profit increased by $2.5 million or 39.3%, driven by higher margins of 20.8% compared to 15.8% [32] Market Data and Key Metrics Changes - In the healthcare sector, spending patterns are normalizing, with a national healthcare owner engaging the company for $12 million in capital projects across four sites [19] - The industrial and manufacturing markets continue to see seasonal shutdowns and facility upgrades, benefiting the company’s local business models [20] - The life science and higher education markets have shown cautious spending, but clients are beginning to communicate anticipated needs for the coming year [21] Company Strategy and Development Direction - The company’s growth strategy is focused on three pillars: scaling owner-direct relationships, enhancing profitability through expanded offerings, and strategic M&A [5][7] - The shift towards owner-direct relationships has diversified revenue streams and reduced risk, with ODR revenue expected to remain between 70%-80% of total revenue [12] - The company aims to improve margins through proactive sales teams and operational enhancements post-acquisition [16][18] Management's Comments on Operating Environment and Future Outlook - Management noted that while some customers experienced temporary delays in capital spending, spending patterns are normalizing as the year progresses [19] - The company is reaffirming its 2025 guidance of total revenue between $650 million and $680 million, with adjusted EBITDA of $80 million to $86 million [27] - Total organic revenue growth is expected to be in the range of 7-10%, down from previous expectations of 10-15% [28] Other Important Information - The company has made significant investments in building its sales team, which has resulted in higher SG&A relative to peers, but is expected to yield results [23] - The company’s balance sheet remains strong, with total liquidity of $70.3 million as of September 30 [35] Q&A Session Summary Question: Revenue contribution from Pioneer Power - Management indicated that Pioneer Power is expected to contribute closer to $60 million for the second half of 2025, primarily from the industrial segment [37][38] Question: Gross margins within ODR segment - Management acknowledged that gross margins are currently lower due to the nature of work and the transition of Pioneer Power, but they see opportunities for improvement [39][40] Question: SG&A as a percentage of revenue - Management noted that while SG&A as a percentage of revenue has decreased, there will be necessary investments going into 2026 [41] Question: Organic growth expectations - Management confirmed that organic ODR growth year-to-date is 14.4%, with expectations for acceleration in Q4 due to budget spending [43][44] Question: Future visibility in ODR - Management expressed confidence in visibility for ODR, emphasizing the mix of quick-burning work and fixed-price projects [55][56] Question: National relationship development - Management highlighted the progress made in building national relationships, noting that trust has been established with larger clients [57][58]

Company Overview - Limbach specializes in revitalizing and maintaining mission-critical systems in existing facilities [6] - The company operates in six distinct vertical markets across 17 Metropolitan Statistical Areas [19] - Limbach combines engineering expertise with skilled craftsmanship to deliver integrated solutions [16] Financial Performance and Strategy - Limbach is shifting its revenue mix towards Owner Direct Relationships (ODR), targeting ~80% ODR revenue [31] - Gross Margin has expanded nearly 1,480 bps from FY 2019 to FY 2024, reaching 27.8% [32] - Adjusted EBITDA Margin has increased more than 4x from 3.0% to 12.3% over the period from FY 2019 – FY 2024 [32] - The company's 2025 guidance projects total revenue between $650 million and $680 million, with ODR revenue accounting for 70% to 80% of the mix [68] - 2025 Adjusted EBITDA is projected to be $80 million to $86 million, with an Adjusted EBITDA Margin of 12% to 13% [68] Acquisitions and Growth - Limbach aims to add $8 million to $10 million of Adjusted EBITDA on a full-year basis through strategic acquisitions [49] - Pioneer Power Inc (PPI) is expected to contribute annualized revenue of approximately $120 million and Adjusted EBITDA of $10 million beginning in 2026 [58] - Consolidated Mechanical is expected to contribute annualized revenue of approximately $23 million beginning in 2025, and EBITDA of $4 million per annum [63]

Company Performance - Limbach reported quarterly earnings of $1.05 per share, missing the Zacks Consensus Estimate of $1.09 per share, but showing an increase from $0.62 per share a year ago, representing an earnings surprise of -3.67% [1] - The company posted revenues of $184.58 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.07%, and up from $133.92 million year-over-year [2] - Over the last four quarters, Limbach has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Future Outlook - The current consensus EPS estimate for the coming quarter is $1.30 on revenues of $199.65 million, and for the current fiscal year, it is $4.43 on revenues of $659.43 million [7] - The estimate revisions trend for Limbach was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - Limbach operates within the Zacks Building Products - Miscellaneous industry, which is currently ranked in the bottom 39% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Limbach's stock performance [5]

Core Insights - Limbach Holdings, Inc. reported a solid third quarter for 2025, with a net income of $8.8 million and an adjusted EBITDA of $21.8 million, reflecting a strategic transition to higher-margin Owner Direct Relationships (ODR) business [1][3][5] Financial Performance - Total revenue increased by 37.8% to $184.6 million from $133.9 million, driven by acquisitions and organic growth [5][6] - ODR revenue rose by 52.0%, accounting for 76.6% of total revenue, with organic ODR revenue growth at 12.2% [5][6] - Net income increased by 17.4% to $8.8 million, or $0.73 per diluted share, compared to $7.5 million, or $0.62 per diluted share in the prior year [5][13] - Adjusted net income was $12.7 million, or $1.05 per adjusted diluted earnings per share, up from $10.9 million, or $0.91 [5][13] - Adjusted EBITDA increased by 25.6% to $21.8 million from $17.3 million [5][13] Strategic Initiatives - The company completed the acquisition of Pioneer Power, enhancing its presence in the Upper Midwest and industrial markets, with Pioneer Power's revenue performance exceeding expectations [4][6] - Management emphasized the focus on improving Pioneer Power's margins and integrating it into the Limbach platform [4][6] Guidance and Outlook - The company reaffirmed its full-year 2025 revenue guidance of $650 million to $680 million and adjusted EBITDA guidance of $80 million to $86 million [1][8][12] - The total organic revenue growth expectation was refined to 7% to 10%, down from the previous 10% to 15% [12][8] Balance Sheet and Cash Flow - As of September 30, 2025, cash and cash equivalents were $9.8 million, with current assets at $216.8 million and current liabilities at $151.2 million, resulting in a current ratio of 1.43x [7][20] - Net cash from operating activities was $13.3 million, significantly up from $4.9 million in the prior year [5][13]

Revenue Growth - Total revenue for the three months ended September 30, 2025, increased by $50.7 million, or 37.8%, to $184.6 million compared to $133.9 million for the same period in 2024[181]. - ODR revenue for the three months ended September 30, 2025, increased by $48.4 million, or 52.0%, to $141.4 million compared to $93.0 million for the same period in 2024, driven by recent acquisitions[182]. - GCR revenue for the three months ended September 30, 2025, increased by $2.3 million, or 5.6%, to $43.2 million compared to $40.9 million for the same period in 2024, supported by Pioneer Power and Kent Island operations[184]. - Total revenue for the nine months ended September 30, 2025 increased by $84.8 million, or 22.6%, to $459.9 million compared to $375.1 million in 2024[196]. - ODR revenue for the nine months ended September 30, 2025 increased by $90.7 million, or 36.3%, to $340.7 million, driven by recent acquisitions[197]. - GCR revenue for the nine months ended September 30, 2025 decreased by $5.9 million, or 4.7%, to $119.2 million, primarily due to a strategic shift towards ODR[198]. Profitability - Total gross profit for the three months ended September 30, 2025, was $44.7 million, representing a gross profit margin of 24.2%, compared to $36.1 million and 27.0% in 2024[180]. - Gross profit for the three months ended September 30, 2025 increased by $8.6 million, or 23.7%, to $44.7 million compared to the same period in 2024[185]. - ODR gross profit rose by $6.0 million, or 20.3%, while GCR gross profit increased by $2.5 million, or 39.3%[185]. - Net income for the three months ended September 30, 2025, was $8.8 million, or 4.8% of total revenue, compared to $7.5 million, or 5.6% in 2024[180]. - Net income for the nine months ended September 30, 2025 was $26.8 million, representing a 27.5% increase from $21.0 million in 2024[195]. Expenses - Selling, general and administrative expenses for the three months ended September 30, 2025, were $28.3 million, or 15.3% of total revenue, compared to $23.7 million, or 17.7% in 2024[180]. - SG&A expenses for the three months ended September 30, 2025 increased by $4.6 million, or 19.3%, but as a percentage of revenue decreased to 15.3% from 17.7%[187]. - Selling, General and Administrative (SG&A) expenses increased by approximately $11.7 million, or 16.7%, to $81.5 million for the nine months ended September 30, 2025, compared to $69.8 million in the prior year[201]. - Amortization of intangibles for the three months ended September 30, 2025 increased by $1.5 million, or 176.5%, to $2.4 million due to recent acquisitions[191]. - Interest expense for the three months ended September 30, 2025 increased by $0.8 million, or 161.3%, to $1.2 million, reflecting higher borrowings[192]. - Interest expense increased by 68.1% to $2.3 million for the nine months ended September 30, 2025, compared to $1.4 million in the prior year[205]. Acquisitions - The acquisition of Pioneer Power was completed for a purchase price of $66.1 million, expanding the company's footprint in the Midwest[174]. - The acquisition of Consolidated Mechanical was completed for $23.0 million, with an additional earnout of up to $2.0 million potentially payable over 2026 and 2027[175]. - The acquisition of Kent Island was completed for $15.0 million, with an earnout of up to $5.0 million potentially payable over 2025 and 2026[176]. - The Company aims to expand its geographic footprint and enhance its offerings through strategic acquisitions, including the acquisition of Pioneer Power, which serves critical facilities in the Upper Midwest[219]. - Acquisition-related retention and contingent consideration expenses were $1.8 million for the nine months ended September 30, 2025, down from $2.3 million in the prior year[202]. Backlog and Future Revenue - The Company’s ODR backlog as of September 30, 2025, was $241.6 million, reflecting an increase from $225.3 million as of December 31, 2024, with an estimated 44% expected to be recognized as revenue over the remainder of 2025[209]. - The GCR backlog decreased to $121.2 million as of September 30, 2025, from $140.0 million at December 31, 2024, with an estimated 31% expected to be recognized as revenue over the remainder of 2025[210]. - The Company aims to achieve a revenue mix of 70%-80% from the ODR segment by 2025, with ODR revenue accounting for 74.1% of total consolidated revenue for the nine months ended September 30, 2025[215]. Cash Flow and Liquidity - The Company generated $17.6 million in cash from operating activities for the nine months ended September 30, 2025, compared to $17.5 million for the same period in 2024, reflecting a net income increase of $5.7 million[230]. - Cash flows used in investing activities were $67.9 million for the nine months ended September 30, 2025, primarily due to a $65.7 million outflow associated with the Pioneer Power acquisition[233]. - Cash flows provided by financing activities were $15.2 million for the nine months ended September 30, 2025, compared to cash flows used of $8.4 million for the same period in 2024[235]. - The Company borrowed $41.8 million on its revolving credit facility during the nine months ended September 30, 2025, with additional inflows of $6.3 million from share sales for employee tax withholding[235]. - The Company believes its current cash and cash equivalents, along with available borrowing capacity, will be sufficient to meet working capital and capital expenditure requirements for at least the next 12 months[240]. Financial Position - The Company reported a net working capital of $65.6 million as of September 30, 2025, down from $69.3 million at the end of 2024[229]. - The current ratio as of September 30, 2025, was 1.43, slightly down from 1.46 at the end of 2024, indicating a stable liquidity position[229]. - Long-term debt increased to $61.9 million as of September 30, 2025, from $27.2 million as of December 31, 2024[241]. - The Company had approximately $111.0 million in surety bonds outstanding as of September 30, 2025, compared to $109.3 million as of December 31, 2024[242]. - Total available funding capacity as of September 30, 2025, was $70.3 million, including $9.8 million in cash and cash equivalents[237]. Market Conditions - The Company continues to monitor the impact of inflation and tariffs, particularly the 50% tariffs on certain steel and aluminum products implemented in 2025, which could affect costs and supply availability[224]. - The Company is focused on enhancing operational efficiency and margin expansion by evolving its offerings to meet current market demands[217]. - The Company continues to focus on smaller, higher-margin projects in its GCR segment to improve profitability and reduce risks associated with larger, complex projects[216]. - A hypothetical 100 basis point increase in interest rates would result in an approximate $0.9 million increase in annualized interest expense on variable-rate debt[253]. - The Company expects growth in its ODR business to positively impact cash flow trends, which are less sensitive to cash flow issues from large GCR projects[239].

Financial Performance - Q3 2025 net income was $8.8 million, or $0.73 per diluted share, compared to $7.5 million, or $0.62 per diluted share in Q3 2024, representing a 17.4% increase[6]. - Total revenue increased 37.8% to $184.6 million from $133.9 million, driven by acquisitions and organic growth[6]. - Adjusted EBITDA for Q3 2025 was $21.8 million, up 25.6% from $17.3 million in Q3 2024[6]. - Operating income for the three months ended September 30, 2025, increased to $13,345,000, a 22.6% rise compared to $10,888,000 in 2024[17]. - Net income for the nine months ended September 30, 2025, was $26,764,000, compared to $21,033,000 for the same period in 2024, reflecting a 27.3% increase[21]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $54,585,000, up from $42,898,000 in 2024, reflecting a significant growth in operational performance[35]. - Operating income for the nine months ended September 30, 2025, was $31,898,000, representing a 24.6% increase from $25,610,000 in 2024[29]. - Adjusted diluted earnings per share for the nine months ended September 30, 2025, was $3.10, up from $2.46 in 2024[36]. Revenue Breakdown - Owner Direct Relationships (ODR) revenue rose 52.0% to $141.4 million, accounting for 76.6% of total revenue, with organic ODR revenue growth of 12.2%[6][7]. - The acquisition of Pioneer Power contributed $37.1 million to ODR revenue, with acquisition-related revenue accounting for 39.8% of the ODR segment's growth[7]. - Total revenue for the nine months ended September 30, 2025, was $459,932,000, representing a 22.6% increase from $375,131,000 in 2024[29]. - ODR revenue increased by 36.3% to $340,723,000, while GCR revenue decreased by 4.7% to $119,209,000[29]. - Acquisition-related revenue contributed $76,128,000 for the nine months ended September 30, 2025, accounting for 20.3% of total revenue growth[38]. Profitability Metrics - Total gross profit increased 23.7% to $44.7 million, with ODR gross profit rising 20.3% to $35.7 million[9]. - Total gross profit for the nine months ended September 30, 2025, was $121,230,000, a 20.4% increase from $100,710,000 in 2024[29]. - Adjusted EBITDA margin for the nine months ended September 30, 2025, was 11.9%, compared to 11.4% in 2024[35]. Expenses and Cash Flow - Selling, general and administrative (SG&A) expenses increased by approximately $4.6 million to $28.3 million, but SG&A as a percentage of revenue decreased to 15.3%[9]. - The company reported net cash from operating activities of $13.3 million, significantly up from $4.9 million in the prior year[6]. - The company reported a net cash provided by operating activities of $17,571,000 for the nine months ended September 30, 2025, compared to $17,494,000 for the same period in 2024[21]. Balance Sheet Highlights - The current ratio as of September 30, 2025, was 1.43x, slightly down from 1.46x at the end of 2024[8]. - Total current assets as of September 30, 2025, were $216,819,000, slightly down from $220,334,000 as of December 31, 2024[19]. - Total assets increased to $409,117,000 as of September 30, 2025, compared to $352,129,000 as of December 31, 2024[19]. - Total liabilities rose to $227,555,000 as of September 30, 2025, from $198,638,000 as of December 31, 2024[19]. - Cash and cash equivalents decreased to $9,818,000 as of September 30, 2025, down from $44,930,000 as of December 31, 2024[19].

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