FOR IMMEDIATE RELEASE Limbach Holdings, Inc. Reports Fourth Quarter and 2023 Results Owner Direct Relationships ("ODR") Segment Revenue up 22.8% Year-over-Year for Q4 and 21.1% for the Year ODR Segment Accounted for 55.1% of Revenue and 71.1% of Consolidated Gross Profit for the Quarter Consolidated Gross Margin Increased to 23.3% for the Quarter and 23.1% for the Year Year-end Cash and Cash Equivalents of $59.8 million WARRENDALE, PA – March 13, 2024 – Limbach Holdings, Inc. (Nasdaq: LMB) ("Limbach" or the ...

Financial Performance & Guidance - The company projects revenue between $490 million and $520 million and adjusted EBITDA between $42 million and $45 million[9] - TTM Adjusted EBITDA as of September 30, 2023, was $45.8 million[47] - The company received $15.6 million from the settlement of an outstanding claim during the quarter[21] Strategic Initiatives & Acquisitions - The company is focused on expanding the ODR (Owner Direct Relationships) segment, targeting annual growth in the "low teens"[17] - Limbach acquired ACME, expecting it to contribute $10 million in revenue and over $1 million in EBITDA on a full-year basis[6] - Limbach acquired Industrial Air for $13.5 million in cash, with potential earn-outs of $6.5 million over 2024/2025, expecting it to contribute $30 million in revenue and $4 million in EBITDA on a full year basis[69, 84] Balance Sheet & Capital Allocation - As of September 30, 2023, the company had $57.5 million in cash and cash equivalents and a net cash position of $35.2 million[47, 14] - The company has a credit revolver capacity of $50 million, with $10 million borrowed as of September 30, 2023[47] Segment Performance - In Q3 2023, ODR revenue was $65.8 million, compared to $59.7 million in Q3 2022, representing a 4.4% increase[13] - Gross profit from ODR in Q3 2023 was $19.3 million, with a margin of 29.3%, compared to $15.2 million in Q3 2022, with a margin of 25.7%, representing a 33.6% increase[13]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) 797 Commonwealth Drive, Warrendale, Pennsylvania 15086 (Address of principal executive offices) (Zip Code) Delaware, USA 46-5399422 (I.R.S. Employer Id ...

Financial Data and Key Metrics Changes - The company reported consolidated top line growth of 7.5%, with ODR revenues up 18.1% year-over-year, while GCR revenue remained flat [23][39] - Consolidated gross margin for the second quarter was 22.8%, with GCR gross margin at 17.1% and ODR gross margin at 29.3% [44] - Free cash flow for the quarter was $8.8 million, approximately 74% of adjusted EBITDA [7] Business Line Data and Key Metrics Changes - The ODR segment accounted for 47.1% of total consolidated revenue, an increase from 42.9% the previous year [23] - The company is focusing on increasing the proportion of revenues from the ODR segment to enhance consolidated gross margin [21][47] Market Data and Key Metrics Changes - The company has a strong balance sheet with cash and cash equivalents of $45.9 million and a net cash position of $23.6 million at quarter end [24] - Demand in mission-critical vertical markets remains strong, with a focus on maintaining durable demand through emergency and on-demand services [29][54] Company Strategy and Development Direction - The strategic plan focuses on three primary value drivers: segment mix, evolved offerings for customers, and a strategic acquisition plan [3][48] - The company is pursuing tuck-in acquisitions to expand market share and larger acquisitions to enter new geographies [48] - The acquisition of ACME Industrial is expected to enhance customer relationships and market position in the hydroelectric sector [22] Management Comments on Operating Environment and Future Outlook - Management reiterated revenue guidance for 2023 in the range of $490 million to $520 million and adjusted EBITDA guidance increased to $38 million to $41 million [10][53] - The company is adapting to new supply chain dynamics and equipment availability challenges, emphasizing the importance of maintaining strong demand [55] Other Important Information - SG&A expenses for the quarter were $20.4 million, down from $21.1 million in the first quarter but up from $18.7 million year-over-year [6] - The company is actively enhancing its social media presence to showcase projects and services [12][36] Q&A Session Summary Question: Demand growth in ODR business - Management noted strong demand across both direct projects and maintenance, with a focus on consultative partnerships with clients [30][40] Question: Future EBITDA margin targets - Management indicated that while strong progress has been made on EBITDA margins, growth will continue to be driven by revenue increases rather than a fixed target [57]

Business Model & Strategy - Limbach aims to be a one-stop-shop for building owners, maximizing their investment in mission-critical assets through full life-cycle capabilities[2, 9] - The company's strategy involves a shift towards Owner-Direct Relationships (ODR), targeting a gross margin range of 25-28%, compared to General Contractor Relationships (GCR) with a target of 12-15%[34, 35] - Limbach is evolving its business model to focus on recurring revenue from building maintenance services, driving higher margins in the ODR segment[9] - The company is positioned to benefit from customer spending flexibility between Capital and Operating Budgets, providing macroeconomic resilience[9] Financial Performance & Targets - As of June 30, 2023, Limbach had $45.9 million in cash and cash equivalents and $23.6 million in net cash, with TTM adjusted EBITDA of $42.4 million[9] - From FY 2018 to FY 2022, Limbach's gross margin expanded by nearly 58% to 18.9%, driving adjusted EBITDA margin up more than 5x from 1.6% to 8.3%[39] - Limbach's FY 2023 revenue guidance is between $490 million and $520 million, with adjusted EBITDA between $38 million and $41 million[66] Growth & Acquisitions - Limbach is pursuing a three-pillar approach to scale the business: margin expansion through evolved offerings, producing better ODR margin opportunities, and growing revenue and market share[26, 31] - The company is targeting acquisitions with total revenue between $25 million and $40 million, with a mix of ODR and GCR revenue[44] - A recent acquisition, ACME, is expected to contribute $10 million in revenue and over $1 million in EBITDA annually[62] Market Trends & Opportunities - Strong sector tailwinds are driven by building owners focusing on ROIC, including maintenance and retrofit of existing facilities[9] - Limbach serves mission-critical end markets, including healthcare, data centers, industrial, higher education, cultural & entertainment, and life sciences[11, 64] - The company is positioned to capitalize on industry trends such as reshoring, the CHIPS & Science Act, and the Build America Buy America Act (BABAA)[6]

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=Part%20I.%20Financial%20Information) Presents unaudited condensed consolidated financial statements and management's discussion for Q2 2023 and related disclosures [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements of Limbach Holdings, Inc. for the periods ended June 30, 2023, and December 31, 2022, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes on business operations, accounting policies, revenue recognition, debt, equity, and other financial disclosures [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Summarizes the company's financial position with assets, liabilities, and equity as of June 30, 2023, and December 31, 2022 **Condensed Consolidated Balance Sheets (in thousands):** | Item | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | **ASSETS** | | | | Total current assets | $199,209 | $225,990 | | Property and equipment, net | $19,623 | $18,224 | | Intangible assets, net | $14,575 | $15,340 | | Goodwill | $11,370 | $11,370 | | Total assets | $267,427 | $294,556 | | **LIABILITIES** | | | | Total current liabilities | $127,269 | $159,085 | | Total liabilities | $161,769 | $199,114 | | **STOCKHOLDERS' EQUITY** | | | | Total stockholders' equity | $105,658 | $95,442 | | Total liabilities and stockholders' equity | $267,427 | $294,556 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's financial performance, including revenue, gross profit, operating income, and net income for Q2 2023 and 2022 **Condensed Consolidated Statements of Operations (in thousands, except per share data):** | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $124,882 | $116,120 | $245,891 | $230,942 | | Gross profit | $28,513 | $21,320 | $54,740 | $39,660 | | Operating income | $7,552 | $1,466 | $12,205 | $673 | | Income (loss) before income taxes | $7,345 | $1,103 | $10,960 | $(1,029) | | Net income (loss) | $5,320 | $866 | $8,313 | $(650) | | Basic EPS | $0.50 | $0.08 | $0.79 | $(0.06) | | Diluted EPS | $0.46 | $0.08 | $0.73 | $(0.06) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Outlines changes in stockholders' equity, including common stock, additional paid-in capital, and retained earnings, for the six months ended June 30, 2023 **Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share amounts):** | Item | Balance at Dec 31, 2022 | Stock-based compensation | Shares issued related to vested restricted stock units | Tax withholding related to vested restricted stock units | Shares issued related to employee stock purchase plan | Net income | Balance at June 30, 2023 | | :-------------------------------- | :---------------------- | :----------------------- | :---------------------------------------------------- | :---------------------------------------------------- | :-------------------------------------------------- | :--------- | :--------------------- | | Common stock (shares) | 10,471,410 | — | 250,548 | — | 10,997 | — | 10,946,316 | | Common stock ($) | $1 | — | — | — | — | — | $1 | | Additional paid-in capital | $87,809 | $1,133 | — | $(428) | $97 | — | $89,712 | | Treasury stock, at cost | $(2,000) | — | — | — | — | — | $(2,000) | | Retained earnings | $9,632 | — | — | — | — | $8,313 | $17,945 | | Stockholders' equity | $95,442 | $2,234 | — | $(428) | $97 | $8,313 | $105,658 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Reports cash flows from operating, investing, and financing activities, showing the change in cash for the six months ended June 30, 2023 and 2022 **Condensed Consolidated Statements of Cash Flows (in thousands):** | Item | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $26,292 | $12,620 | | Net cash used in investing activities | $(1,224) | $(284) | | Net cash used in financing activities | $(15,188) | $(7,182) | | Increase in cash, cash equivalents and restricted cash | $9,880 | $5,154 | | Cash, cash equivalents and restricted cash, end of period | $45,994 | $19,743 | [Note 1 – Business and Organization](index=11&type=section&id=Note%201%20%E2%80%93%20Business%20and%20Organization) Describes Limbach Holdings, Inc.'s core business as a building systems solutions firm and its two operating segments - Limbach Holdings, Inc. is a building systems solutions firm specializing in HVAC, mechanical, electrical, plumbing, and controls systems, operating in the Northeast, Mid-Atlantic, Southeast, and Midwest regions of the United States[26](index=26&type=chunk) - The Company operates in two segments: General Contractor Relationships (GCR) for new construction/renovation projects and Owner Direct Relationships (ODR) for direct projects, maintenance, and service[27](index=27&type=chunk) [Note 2 – Significant Accounting Policies](index=11&type=section&id=Note%202%20%E2%80%93%20Significant%20Accounting%20Policies) Details the accounting principles used in preparing the unaudited financial statements, including recent ASU adoptions - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q requirements for smaller reporting companies, with certain disclosures condensed or omitted[29](index=29&type=chunk) - The Company adopted ASU 2016-13 (Credit Losses) on January 1, 2023, using the modified retrospective method, which did not materially impact its financial position or results of operations[34](index=34&type=chunk) - The Company evaluated ASU 2020-04 and ASU 2021-01 (Reference Rate Reform) and determined they did not have a significant impact, as its credit agreements and interest rate swap now utilize SOFR as the benchmark rate[39](index=39&type=chunk) [Note 3 – Revenue from Contracts with Customers](index=13&type=section&id=Note%203%20%E2%80%93%20Revenue%20from%20Contracts%20with%20Customers) Explains revenue recognition policies for fixed-price and time & materials contracts, along with contract assets and remaining performance obligations - Revenue from fixed-price construction contracts is recognized using the cost-to-cost method, while time and materials contracts are recognized as services are performed[41](index=41&type=chunk) Contract Assets (in thousands): | Item | June 30, 2023 | December 31, 2022 | Change | | :---------------------------------------------------- | :------------ | :---------------- | :----- | | Costs and estimated earnings in excess of billings | $34,006 | $33,573 | $433 | | Retainage receivable | $25,418 | $27,880 | $(2,462) | | Total contract assets | $59,424 | $61,453 | $(2,029) | Remaining Performance Obligations (as of June 30, 2023, in millions): | Segment | Total Amount | Expected Recognition (Remainder of 2023) | | :------ | :----------- | :--------------------------------------- | | GCR | $260.2 | 52% | | ODR | $113.6 | 65% | *Substantial majority of remaining obligations expected within 24 months* [Note 4 – Goodwill and Intangibles](index=15&type=section&id=Note%204%20%E2%80%93%20Goodwill%20and%20Intangibles) Provides details on goodwill allocated to the ODR segment and the composition and amortization of other intangible assets - Goodwill remained at **$11.4 million** as of June 30, 2023, and December 31, 2022, entirely associated with the ODR segment, with no impairment charges recognized during the reported periods[53](index=53&type=chunk)[54](index=54&type=chunk) Intangible Assets (Net, excluding goodwill, in thousands): | Item | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Total amortized intangible assets | $4,615 | $5,380 | | Total unamortized intangible assets (Limbach trade name) | $9,960 | $9,960 | | Total intangible assets, excluding goodwill | $14,575 | $15,340 | *Total amortization expense for definite-lived intangible assets was $0.4 million for both the three and six months ended June 30, 2023 and 2022* [Note 5 – Debt](index=16&type=section&id=Note%205%20%E2%80%93%20Debt) Outlines the company's long-term debt structure, including revolving loans, finance leases, and recent credit agreement amendments Long-term Debt (in thousands): | Item | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | A&R Wintrust Term Loan | $— | $21,453 | | Wintrust Revolving Loans | $10,000 | $— | | Finance leases | $6,961 | $4,954 | | Financing liability | $5,351 | $5,351 | | Total debt | $22,312 | $31,758 | | Less: Current portion of long-term debt | $(2,431) | $(9,564) | | Less: Unamortized discount and debt issuance costs | $(396) | $(666) | | Long-term debt | $19,485 | $21,528 | - On May 5, 2023, the Company entered into the Second Amended and Restated Credit Agreement, increasing its senior secured revolving credit facility to **$50.0 million** and repaying the outstanding A&R Wintrust Term Loan[71](index=71&type=chunk)[72](index=72&type=chunk) - The Company accounted for a sale and leaseback arrangement of its Pontiac, MI facility as a financing transaction (finance lease) due to the significance of the present value of lease payments, resulting in a financing liability of **$4.9 million** as of June 30, 2023[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) [Note 6 – Equity](index=20&type=section&id=Note%206%20%E2%80%93%20Equity) Details changes in equity, including warrant exercises, share repurchase program completion, and amendments to the Omnibus Incentive Plan Outstanding Warrants (shares): | Item | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | $15 Exercise Price Sponsor Warrants | — | 600,000 | | Merger Warrants | 466,199 | 629,643 | | Total | 466,199 | 1,229,643 | *During Q2 2023, 600,000 $15 Exercise Price Sponsor Warrants and 163,444 Merger Warrants were exercised on a cashless basis, converting into 167,564 and 45,797 common shares, respectively* - The Board of Directors approved amendments to the Omnibus Incentive Plan in March 2023, increasing authorized shares by **450,000** to a total of **3,050,000** shares[92](index=92&type=chunk) - As of June 30, 2023, the Company completed its **$2.0 million** Share Repurchase Program, repurchasing shares of its common stock[94](index=94&type=chunk) [Note 7 – Fair Value Measurements](index=22&type=section&id=Note%207%20%E2%80%93%20Fair%20Value%20Measurements) Discusses the fair value of financial instruments, cash equivalents, and the contingent earnout liability using various valuation methods - The Company's financial instruments, including cash and cash equivalents, trade accounts receivable, and accounts payable, approximate fair value due to their short-term maturities and low counterparty default risk[98](index=98&type=chunk) Cash Equivalents (in thousands, as of June 30, 2023): | Item | Fair Value | | :-------------------------- | :--------- | | Overnight repurchase agreements | $32,100 | | U.S. Treasury Bills | $5,000 | | Money market fund | $3,750 | | Total | $40,850 | - The fair value of the Second A&R Wintrust Revolving Loan was **$10.0 million** as of June 30, 2023, determined using discounted estimated future cash flows (Level 3 inputs)[101](index=101&type=chunk) - The estimated exposure to the contingent earnout liability for the 2023 Earnout Period was approximately **$2.7 million** at June 30, 2023, valued using the Monte Carlo Simulation method (Level 3 measurement)[102](index=102&type=chunk)[103](index=103&type=chunk) [Note 8 – Earnings per Share](index=23&type=section&id=Note%208%20%E2%80%93%20Earnings%20per%20Share) Presents basic and diluted earnings per share calculations, including the impact of antidilutive securities, for the reported periods Earnings Per Share (in thousands, except per share amounts): | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $5,320 | $866 | $8,313 | $(650) | | Weighted average shares outstanding – basic | 10,644 | 10,423 | 10,560 | 10,422 | | Weighted average shares outstanding – diluted | 11,507 | 10,567 | 11,336 | 10,422 | | Basic EPS | $0.50 | $0.08 | $0.79 | $(0.06) | | Diluted EPS | $0.46 | $0.08 | $0.73 | $(0.06) | Antidilutive Securities Excluded from Diluted EPS (shares): | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Out-of-the-money warrants | — | 1,229,643 | — | 1,229,643 | | Service-based RSUs | 1 | 17,595 | 26 | 72,871 | | Performance and market-based RSUs | 15 | 48,229 | 60 | 85,969 | | Employee Stock Purchase Plan | 643 | — | 2,426 | 8,451 | | Total | 659 | 1,295,467 | 2,512 | 1,396,934 | [Note 9 – Income Taxes](index=24&type=section&id=Note%209%20%E2%80%93%20Income%20Taxes) Provides the income tax provision and effective tax rates for the three and six months ended June 30, 2023 and 2022 Income Tax Provision (Benefit) and Rate (in thousands, except percentages): | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision (benefit) | $2,025 | $237 | $2,647 | $(379) | | Income tax rate | 27.6% | 21.5% | 24.2% | 36.8% | *The U.S. federal statutory tax rate was 21% for all periods presented* - No valuation allowance was required as of June 30, 2023, or December 31, 2022[112](index=112&type=chunk) [Note 10 – Operating Segments](index=25&type=section&id=Note%2010%20%E2%80%93%20Operating%20Segments) Describes the company's two operating segments, GCR and ODR, and the revised segment reporting structure following a CEO transition - The Company operates in two segments: General Contractor Relationships (GCR) and Owner Direct Relationships (ODR), reflecting how the Chief Operating Decision Maker (CODM) reviews operating results[113](index=113&type=chunk) - Following a CEO transition in March 2023, the Company revised its segment presentation to align with the new CODM's assessment, focusing on segment revenue and gross profit, with SG&A and interest expense no longer allocated to segments[115](index=115&type=chunk) Condensed Consolidated Segment Information (in thousands): | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Revenue:** | | | | | | GCR | $66,102 | $66,336 | $128,393 | $138,268 | | ODR | $58,780 | $49,784 | $117,498 | $92,674 | | Total revenue | $124,882 | $116,120 | $245,891 | $230,942 | | **Gross profit:** | | | | | | GCR | $11,272 | $8,694 | $21,590 | $17,052 | | ODR | $17,241 | $12,626 | $33,150 | $22,608 | | Total gross profit | $28,513 | $21,320 | $54,740 | $39,660 | [Note 11 – Leases](index=26&type=section&id=Note%2011%20%E2%80%93%20Leases) Details the company's lease assets, liabilities, and costs for real estate, trucks, and equipment, including operating and finance leases - The Company leases real estate, trucks, and other equipment, electing not to separate non-lease components from lease components and recognizing short-term leases (12 months or less) as expense[119](index=119&type=chunk)[120](index=120&type=chunk) Total Lease Assets and Liabilities (in thousands): | Item | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Total lease assets | $26,456 | $25,690 | | Total lease liabilities | $30,423 | $29,510 | Total Lease Cost (in thousands): | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $1,134 | $1,288 | $2,340 | $2,686 | | Finance lease cost (Amortization & Interest) | $753 | $751 | $1,450 | $1,468 | | Total lease cost | $1,887 | $2,039 | $3,790 | $4,154 | [Note 12 – Commitments and Contingencies](index=30&type=section&id=Note%2012%20%E2%80%93%20Commitments%20and%20Contingencies) Discloses legal proceedings, surety bonds, and self-insurance liabilities, including a $2.2 million estimated loss contingency - The Company is involved in various legal proceedings, including a lawsuit where an amended statement of decision awarded the plaintiff approximately **$2.2 million**, which was recorded as an estimated loss contingency as of December 31, 2022[130](index=130&type=chunk)[131](index=131&type=chunk) - As of June 30, 2023, the Company had approximately **$117.5 million** in surety bonds outstanding, securing payment and performance obligations under construction contracts[132](index=132&type=chunk) Self-Insurance Liability (in thousands): | Item | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Current liability — workers' compensation and general liability | $67 | $158 | | Current liability — medical and dental | $433 | $557 | | Non-current liability | $502 | $343 | | Total liability | $1,002 | $1,058 | | Restricted cash | $65 | $113 | [Note 13 – Management Incentive Plans](index=31&type=section&id=Note%2013%20%E2%80%93%20Management%20Incentive%20Plans) Outlines the Omnibus Incentive Plan, authorized shares for equity awards, and recognized stock-based compensation expense - The Company's Omnibus Incentive Plan, as amended in 2023, reserves **3,050,000 shares** of common stock for various equity awards, including options, RSUs, and performance-based awards[139](index=139&type=chunk) - Total recognized stock-based compensation expense was **$1.1 million** for the three months and **$2.2 million** for the six months ended June 30, 2023, with **$4.4 million** in unrecognized expense related to unvested RSUs[146](index=146&type=chunk) [Note 14 – Subsequent Events](index=32&type=section&id=Note%2014%20%E2%80%93%20Subsequent%20Events) Reports the acquisition of ACME Industrial Piping, LLC for $5 million cash with a potential earnout of up to $2.5 million - On July 3, 2023, the Company acquired ACME Industrial Piping, LLC for **$5 million** in cash, with a potential earnout of up to **$2.5 million** over two years[147](index=147&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of the Company's financial condition and results of operations for the three and six months ended June 30, 2023, compared to the same periods in 2022, highlighting key drivers of revenue, gross profit, and expenses, as well as liquidity and capital resources [Overview](index=33&type=section&id=Overview) Limbach Holdings, Inc. is an integrated building systems solutions firm specializing in HVAC, mechanical, electrical, plumbing, and control systems for commercial, institutional, and light industrial markets - Limbach Holdings, Inc. is an integrated building systems solutions firm specializing in HVAC, mechanical, electrical, plumbing, and control systems for commercial, institutional, and light industrial markets[149](index=149&type=chunk) - The Company is winding down its Southern California GCR and ODR operations in 2023 to align geographic focus and reduce losses, while maintaining obligations under a sublease agreement[149](index=149&type=chunk) - Core market sectors include Healthcare, Data Centers, Industrial and light manufacturing, Higher Education, Cultural and entertainment, and Life sciences[151](index=151&type=chunk) [Key Components of Condensed Consolidated Statements of Operations](index=33&type=section&id=Key%20Components%20of%20Condensed%20Consolidated%20Statements%20of%20Operations) This section details the primary components of the company's condensed consolidated statements of operations, including revenue, cost of revenue, and selling, general, and administrative expenses - Revenue is primarily generated from fixed-price construction contracts (cost-to-cost method) and time and materials service contracts (as services are performed), with durations typically ranging from three months to two years[151](index=151&type=chunk) - Cost of revenue includes labor, equipment, material, subcontract, and other job costs, with historical fluctuations expected to continue[153](index=153&type=chunk) - Selling, General and Administrative (SG&A) expenses primarily cover personnel costs for administrative, estimating, and corporate functions, along with professional fees and compliance costs[154](index=154&type=chunk) [Operating Segments](index=35&type=section&id=Operating%20Segments) The company manages its business through two operating segments, GCR and ODR, with a revised presentation focusing on segment revenue and gross profit - The Company manages its business through two operating segments: General Contractor Relationships (GCR) and Owner Direct Relationships (ODR), which are aggregated for reporting purposes[160](index=160&type=chunk)[161](index=161&type=chunk) - Following a CEO transition, the segment presentation was revised to focus on segment revenue and gross profit, with SG&A and interest expense no longer allocated to segments[162](index=162&type=chunk) [Comparison of Results of Operations for the three months ended June 30, 2023 and 2022](index=35&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20three%20months%20ended%20June%2030%2C%202023%20and%202022) Analyzes the company's financial performance for the three months ended June 30, 2023, highlighting revenue, gross profit, and net income changes Operating Results (Three Months Ended June 30, in thousands, except percentages): | Item | 2023 | % of Revenue | 2022 | % of Revenue | | :-------------------------------- | :----- | :----------- | :----- | :----------- | | Total revenue | $124,882 | 100.0% | $116,120 | 100.0% | | GCR revenue | $66,102 | 52.9% | $66,336 | 57.1% | | ODR revenue | $58,780 | 47.1% | $49,784 | 42.9% | | Total gross profit | $28,513 | 22.8% | $21,320 | 18.4% | | GCR gross profit | $11,272 | 17.1% | $8,694 | 13.1% | | ODR gross profit | $17,241 | 29.3% | $12,626 | 25.4% | | Selling, general and administrative | $20,416 | 16.3% | $18,690 | 16.1% | | Net income | $5,320 | 4.3% | $866 | 0.7% | - Total revenue increased by **$8.8 million (7.5%)** year-over-year, primarily driven by an **18.1% increase in ODR revenue**, while GCR revenue slightly decreased by **0.4%**[166](index=166&type=chunk) - Gross profit increased by **$7.2 million (33.7%)**, with the total gross profit percentage rising from **18.4% to 22.8%**, mainly due to higher margins in both GCR (**29.7% increase**) and ODR (**36.6% increase**) segments and a favorable contract mix[167](index=167&type=chunk) [Comparison of Results of Operations for the six months ended June 30, 2023 and 2022](index=38&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20six%20months%20ended%20June%2030%2C%202023%20and%202022) Analyzes the company's financial performance for the six months ended June 30, 2023, highlighting revenue, gross profit, and net income changes Operating Results (Six Months Ended June 30, in thousands, except percentages): | Item | 2023 | % of Revenue | 2022 | % of Revenue | | :-------------------------------- | :----- | :----------- | :----- | :----------- | | Total revenue | $245,891 | 100.0% | $230,942 | 100.0% | | GCR revenue | $128,393 | 52.2% | $138,268 | 59.9% | | ODR revenue | $117,498 | 47.8% | $92,674 | 40.1% | | Total gross profit | $54,740 | 22.3% | $39,660 | 17.2% | | GCR gross profit | $21,590 | 16.8% | $17,052 | 12.3% | | ODR gross profit | $33,150 | 28.2% | $22,608 | 24.4% | | Selling, general and administrative | $41,466 | 16.9% | $37,424 | 16.2% | | Net income (loss) | $8,313 | 3.4% | $(650) | (0.3)% | - Total revenue increased by **$14.9 million (6.5%)** year-over-year, driven by a **26.8% increase in ODR revenue**, which offset a **7.1% decrease in GCR revenue**[175](index=175&type=chunk) - Gross profit increased by **$15.1 million (38.0%)**, with the total gross profit percentage rising from **17.2% to 22.3%**, attributed to higher margins in both GCR (**26.6% increase**) and ODR (**46.6% increase**) segments[177](index=177&type=chunk) - SG&A expenses increased by **$4.0 million (10.8%)**, primarily due to higher payroll, CEO transition costs, and stock compensation, partially offset by reduced rent and professional fees[179](index=179&type=chunk) [GCR and ODR Backlog Information](index=40&type=section&id=GCR%20and%20ODR%20Backlog%20Information) Presents backlog data for GCR and ODR segments, indicating expected revenue recognition and strategic shifts in project focus Backlog Information (in millions): | Segment | June 30, 2023 | December 31, 2022 | | :------ | :------------ | :---------------- | | GCR | $260.2 | $302.9 | | ODR | $133.0 | $108.2 | | Total | $393.2 | $411.1 | *The Company expects to recognize approximately $231.5 million of total backlog as revenue over the remainder of 2023* - GCR backlog decreased due to an intentional focus on smaller, higher-margin projects and improved project execution, while ODR backlog increased significantly due to accelerated growth in that business segment[185](index=185&type=chunk)[186](index=186&type=chunk) [Market Update](index=41&type=section&id=Market%20Update) The company continues to be impacted by global economic conditions, inflationary costs, supply chain disruptions, COVID-19, and geopolitical conflicts - The Company continues to be impacted by global economic conditions, inflationary costs, supply chain disruptions, COVID-19, and geopolitical conflicts, expecting elevated cost inflation to persist in 2023[188](index=188&type=chunk) - Mitigation strategies include pricing actions, supply chain productivity improvements, and cost savings initiatives, though impacts remain uncertain and could materially affect business[188](index=188&type=chunk)[189](index=189&type=chunk) [Outlook](index=41&type=section&id=Outlook) For 2023, the Company focuses on improving profitability, accelerating ODR growth, and enhancing GCR project execution through selective pursuit of higher-margin opportunities - For 2023, the Company focuses on improving profitability and operating cash flows, accelerating ODR growth, investing in its workforce, and enhancing GCR project execution through selective pursuit of higher-margin opportunities[190](index=190&type=chunk)[191](index=191&type=chunk) - The Company aims to increase cash flow and operating income through strategically synergistic acquisitions that address capability gaps and expand service offerings[192](index=192&type=chunk) - Management is actively reducing risk and exposure to large, complex, non-owner direct projects where historical industry pricing and associated risks do not align with stakeholder expectations[195](index=195&type=chunk) [Seasonality, Cyclicality and Quarterly Trends](index=42&type=section&id=Seasonality%2C%20Cyclicality%20and%20Quarterly%20Trends) Severe weather can impact productivity and shift revenue/gross profit recognition, while mild weather may reduce maintenance demand; operations experience mild cyclicality with increased activity in Q3 and Q4 - Severe weather can impact productivity and shift revenue/gross profit recognition, while mild weather may reduce maintenance demand; operations experience mild cyclicality with increased activity in Q3 and Q4[196](index=196&type=chunk) [Effect of Inflation and Tariffs](index=42&type=section&id=Effect%20of%20Inflation%20and%20Tariffs) The Company continues to experience higher material costs and supply chain delays, expecting these to persist through 2023, but mitigates impacts through cost escalation factors in bids and fixed-price purchase orders - The Company continues to experience higher material costs and supply chain delays, expecting these to persist through 2023, but mitigates impacts through cost escalation factors in bids and fixed-price purchase orders[197](index=197&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's liquidity needs, funding sources, cash flow activities, and working capital position - The Company's liquidity needs are primarily for working capital, capital expenditures, and strategic investments, historically funded by operating activities and borrowings from commercial banks[198](index=198&type=chunk) Summary Cash Flow Information (in thousands): | Item | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $26,292 | $12,620 | | Net cash used in investing activities | $(1,224) | $(284) | | Net cash used in financing activities | $(15,188) | $(7,182) | | Net increase in cash, cash equivalents and restricted cash | $9,880 | $5,154 | Summarized Working Capital Information (in thousands, except ratios): | Item | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Current assets | $199,209 | $225,990 | | Current liabilities | $(127,269) | $(159,085) | | Net working capital | $71,940 | $66,905 | | Current ratio | 1.57 | 1.42 | - The Company believes its current cash balance (**$45.9 million**), expected cash from operations, and **$35.8 million** available under the Second A&R Wintrust Revolving Loan are sufficient to meet working capital and capital expenditure requirements for at least the next 12 months[214](index=214&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the registrant is not required to provide detailed quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[223](index=223&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting during the period [Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures](index=47&type=section&id=Conclusion%20Regarding%20the%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023 - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023[224](index=224&type=chunk) [Changes in Internal Control over Financial Reporting](index=47&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the period covered by the report - No material changes in internal control over financial reporting occurred during the period covered by the report[225](index=225&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=47&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) Management acknowledges that any control system has inherent limitations and cannot provide absolute assurance of achieving desired objectives or preventing all misstatements - Management acknowledges that any control system has inherent limitations and cannot provide absolute assurance of achieving desired objectives or preventing all misstatements[226](index=226&type=chunk) [PART II](index=48&type=section&id=Part%20II) Presents legal proceedings, risk factors, equity security sales, defaults, and other information for the reporting period [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The Company refers to Note 12 for information regarding legal proceedings, which includes details on a lawsuit where an amended statement of decision awarded the plaintiff $2.2 million, and the Company is evaluating appeal options - Information regarding legal proceedings is detailed in Note 12[229](index=229&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's most recent Annual Report on Form 10-K - No material changes from the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022[230](index=230&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company completed its $2.0 million share repurchase program by June 30, 2023, and issued shares from the cashless exercise of warrants, receiving no proceeds from these warrant exercises [Purchases of Equity Securities by the Issuer and the Affiliated Purchasers](index=48&type=section&id=Purchases%20of%20Equity%20Securities%20by%20the%20Issuer%20and%20the%20Affiliated%20Purchasers) The Company completed its $2.0 million share repurchase program as of June 30, 2023, with no shares repurchased during the three and six months ended June 30, 2023 - The Company completed its **$2.0 million** share repurchase program as of June 30, 2023, with no shares repurchased during the three and six months ended June 30, 2023[231](index=231&type=chunk) [Shares Issued from the Exercise of Warrants](index=48&type=section&id=Shares%20Issued%20from%20the%20Exercise%20of%20Warrants) During the three months ended June 30, 2023, 600,000 $15 Exercise Price Sponsor Warrants and 163,444 Merger Warrants were exercised on a cashless basis, resulting in the issuance of 167,564 and 45,797 common shares, respectively, with no proceeds received by the Company - During the three months ended June 30, 2023, **600,000 $15 Exercise Price Sponsor Warrants** and **163,444 Merger Warrants** were exercised on a cashless basis, resulting in the issuance of **167,564** and **45,797 common shares**, respectively, with no proceeds received by the Company[232](index=232&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities - No defaults upon senior securities[234](index=234&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Not applicable[235](index=235&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) The Company is seeking Delaware Court of Chancery approval to validate stockholder actions from its 2022 Annual Meeting due to a record date exceeding the permitted 60-day maximum - The Company is seeking Delaware Court of Chancery approval to validate stockholder actions from its 2022 Annual Meeting due to a record date exceeding the permitted 60-day maximum under DGCL and Company bylaws[236](index=236&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, promotion letters, credit agreements, and certifications - The section provides a comprehensive list of exhibits filed with the Form 10-Q, including corporate governance documents, employment agreements, credit agreements, and certifications[237](index=237&type=chunk) [SIGNATURES](index=50&type=section&id=SIGNATURES) Certifies the accuracy of the report through signatures from the President, CEO, and CFO [Signatures](index=50&type=section&id=Signatures) The report is signed by Michael M. McCann, President and Chief Executive Officer, and Jayme L. Brooks, Executive Vice President and Chief Financial Officer, on August 9, 2023 - The report was signed by Michael M. McCann, President and Chief Executive Officer, and Jayme L. Brooks, Executive Vice President and Chief Financial Officer, on August 9, 2023[240](index=240&type=chunk)

Financial Data and Key Metrics Changes - Q1 revenue increased year-over-year, with gross margin expanding to 21.7% due to a higher contribution from the ODR segment [58][69] - SG&A expenses rose to $21.1 million from $18.7 million, influenced by CEO transition costs and increased stock-based compensation [59] - Cash conversion exceeded the 70% annual target, with a cash balance of $41.4 million and term debt of $19.6 million at quarter-end [7][29] Business Line Data and Key Metrics Changes - GCR gross margin improved to 16.6%, up from 11%-12% range a year ago, while ODR gross margin was 27.1% [5][58] - The ODR segment accounted for 48.5% of total revenue, up from 44.6% in Q4 2022 and 43.6% for the full year 2022 [72] Market Data and Key Metrics Changes - The demand environment remains strong, particularly in mission-critical sectors, with a focus on both short-term repairs and long-term capital expenditures [80][81] - The company is well-positioned to capitalize on infrastructure upgrades as supply chain demand eases [8] Company Strategy and Development Direction - The company aims for a long-term goal of the ODR segment contributing 70% or more to total revenue, with a focus on selective project execution [58][72] - The acquisition strategy emphasizes cultural fit and operational alignment, targeting both geographic expansion and tuck-in acquisitions [71] Management's Comments on Operating Environment and Future Outlook - Management noted that market conditions remain stable, with a focus on engaging customers and providing long-term value [62][69] - The company expects stronger revenue in the second half of the year compared to the first half, guiding towards the upper end of the revenue range [6][29] Other Important Information - The company reiterated its financial guidance for 2023, projecting total revenue between $490 million and $520 million and adjusted EBITDA between $33 million and $37 million [29] - The company has a robust acquisition pipeline and is focused on maintaining a strong balance sheet to support growth initiatives [75] Q&A Session Summary Question: Demand environment and owner direct focus - Management indicated that the demand environment is strong, particularly for mission-critical systems, with a focus on both short-term and long-term needs [80][81] Question: ODR segment and proactive relationships - Management discussed the shift from reactive to proactive relationships with customers, emphasizing the importance of data-driven solutions [90][91] Question: GCR margin perspective - Management highlighted that being selective in GCR projects allows for improved margins as the company approaches a 50-50 revenue split between ODR and GCR [88]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) Provides basic identification details for Limbach Holdings, Inc.'s Form 10-Q filing for the quarter ended March 31, 2023 [Registrant Details](index=1&type=section&id=Registrant%20Details) Details Limbach Holdings, Inc.'s incorporation, address, and filing period for the Form 10-Q - Registrant: **LIMBACH HOLDINGS, INC.**[2](index=2&type=chunk) - Incorporation: **Delaware, USA**[2](index=2&type=chunk) - Quarterly Period Ended: **March 31, 2023**[2](index=2&type=chunk) [Securities and Filer Status](index=1&type=section&id=Securities%20and%20Filer%20Status) Limbach's common stock is listed on Nasdaq (LMB), confirming SEC compliance and filer status Title of Each Class | Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, par value $0.0001 per share | LMB | The Nasdaq Stock Market LLC | - Filing Compliance: Filed all required reports in the preceding 12 months and subject to filing requirements for the past 90 days (Yes). Submitted every Interactive Data File (Yes)[4](index=4&type=chunk) - Filer Status: **Non-accelerated filer** and **Smaller reporting company**[5](index=5&type=chunk) - Shell Company: **No**[6](index=6&type=chunk) - Common Stock Outstanding (as of May 5, 2023): **10,579,261 shares**[6](index=6&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Advises readers that the report contains forward-looking statements subject to risks and uncertainties, which the company does not undertake to update [Forward-Looking Statement Disclosure](index=4&type=section&id=Forward-Looking%20Statement%20Disclosure) Details forward-looking statements, their basis, limited update obligation, and key risk factors - Forward-looking statements are covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[11](index=11&type=chunk) - Statements are based on information available as of the filing date and management's current expectations, forecasts, and assumptions[12](index=12&type=chunk) - The Company does not undertake any obligations to update forward-looking statements, except as required by applicable securities laws[12](index=12&type=chunk) - Key risk factors that could cause actual results to differ include intense competition, dependence on limited customers, unexpected backlog adjustments, cost overruns, and various operational, financial, and external risks (e.g., inflation, interest rates, supply chain, cyber security, climate change)[13](index=13&type=chunk)[14](index=14&type=chunk) [Part I. Financial Information](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2023 [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Q1 2023, including balance sheets, operations, equity, cash flows, and related notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Details the company's financial position, including assets, liabilities, and stockholders' equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | ASSETS | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $41,376 | $36,001 | | Accounts receivable (net) | $99,809 | $124,442 | | Contract assets | $64,190 | $61,453 | | Total current assets | $212,256 | $225,990 | | Total assets | $280,570 | $294,556 | | LIABILITIES | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Current portion of long-term debt | $9,643 | $9,564 | | Accounts payable, including retainage | $60,194 | $75,122 | | Contract liabilities | $44,875 | $44,007 | | Total current liabilities | $142,497 | $159,085 | | Total liabilities | $181,333 | $199,114 | | STOCKHOLDERS' EQUITY | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Total stockholders' equity | $99,237 | $95,442 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Presents revenues, expenses, and net income (loss) for the three months ended March 31, 2023 and 2022 Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $121,009 | $114,822 | | Cost of revenue | $94,782 | $96,482 | | Gross profit | $26,227 | $18,340 | | Total operating expenses | $21,574 | $19,133 | | Operating income (loss) | $4,653 | $(793) | | Income (loss) before income taxes | $3,615 | $(2,132) | | Net income (loss) | $2,993 | $(1,516) | | Basic EPS | $0.29 | $(0.15) | | Diluted EPS | $0.27 | $(0.15) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Details changes in equity accounts, including common stock, additional paid-in capital, and retained earnings Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share amounts) | Item | Balance at Dec 31, 2022 | Stock-based Compensation | Shares Issued (Vested RSUs) | Tax Withholding | Shares Issued (ESPP) | Net Income | Balance at Mar 31, 2023 | | :-------------------------- | :---------------------- | :----------------------- | :-------------------------- | :-------------- | :------------------- | :--------- | :---------------------- | | Common stock | $1 | — | — | — | — | — | $1 | | Additional paid-in capital | $87,809 | $1,133 | — | $(428) | $97 | — | $88,611 | | Treasury stock, at cost | $(2,000) | — | — | — | — | — | $(2,000) | | Retained earnings | $9,632 | — | — | — | — | $2,993 | $12,625 | | **Total Stockholders' Equity** | **$95,442** | **$1,133** | **—** | **$(428)** | **$97** | **$2,993** | **$99,237** | | Item | Balance at Dec 31, 2021 | Stock-based Compensation | Shares Issued (Vested RSUs) | Tax Withholding | Shares Issued (ESPP) | Net Loss | Balance at Mar 31, 2022 | | :-------------------------- | :---------------------- | :----------------------- | :-------------------------- | :-------------- | :------------------- | :--------- | :---------------------- | | Common stock | $1 | — | — | — | — | — | $1 | | Additional paid-in capital | $85,004 | $599 | — | $(148) | $98 | — | $85,553 | | Retained earnings | $2,833 | — | — | — | — | $(1,516) | $1,317 | | **Total Stockholders' Equity** | **$87,838** | **$599** | **—** | **$(148)** | **$98** | **$(1,516)** | **$86,871** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities for the three months ended March 31 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $9,366 | $(2,965) | | Net cash used in investing activities | $(822) | $(130) | | Net cash (used in) provided by financing activities | $(3,169) | $6,685 | | Increase (decrease) in cash, cash equivalents and restricted cash | $5,375 | $3,590 | | Cash, cash equivalents and restricted cash, end of period | $41,489 | $18,179 | [Note 1 – Business and Organization](index=11&type=section&id=Note%201%20%E2%80%93%20Business%20and%20Organization) Describes Limbach Holdings, Inc. as a building systems solutions firm operating in GCR and ODR segments - Limbach Holdings, Inc. is a building systems solutions firm specializing in HVAC, mechanical, electrical, plumbing, and controls systems[26](index=26&type=chunk) - Services include mechanical construction, HVAC service/maintenance, energy audits, engineering/design build, prefabrication, and sustainable building solutions[26](index=26&type=chunk) - Operates in two segments: General Contractor Relationships (GCR) for new construction/renovation, and Owner Direct Relationships (ODR) for direct projects, maintenance, and service[27](index=27&type=chunk) - Customers are in diverse industries including data centers, healthcare, industrial, higher education, and life sciences[26](index=26&type=chunk) [Note 2 – Significant Accounting Policies](index=11&type=section&id=Note%202%20%E2%80%93%20Significant%20Accounting%20Policies) Outlines key accounting principles, estimates, and recent accounting standard adoptions impacting financial statements - Financial statements are unaudited and prepared in accordance with GAAP for interim information and Form 10-Q requirements for smaller reporting companies[29](index=29&type=chunk)[32](index=32&type=chunk) - Significant estimates include revenue recognition on construction contracts, intangibles, property and equipment, fair value accounting for acquisitions, insurance reserves, and contingent consideration[30](index=30&type=chunk) - Adopted ASU 2016-13 (Credit Losses) on **January 1, 2023**, using the modified retrospective method; no material impact on financial position or results[34](index=34&type=chunk) - Credit loss guidance is relevant to trade accounts receivable and contract assets, with greater risk identified for ODR-related service-type receivables[35](index=35&type=chunk) - Evaluated ASU 2020-04 and ASU 2021-01 (Reference Rate Reform) and determined no significant impact, as the A&R Credit Agreement and interest rate swap now utilize SOFR[39](index=39&type=chunk) - Currently assessing the impact of ASU 2020-06 (Accounting for Convertible Instruments) which is effective for fiscal years beginning after **March 31, 2024**[40](index=40&type=chunk) [Note 3 – Revenue from Contracts with Customers](index=13&type=section&id=Note%203%20%E2%80%93%20Revenue%20from%20Contracts%20with%20Customers) Details revenue recognition, contract asset/liability movements, and remaining performance obligations for customer contracts - Revenue from fixed-price contracts is recognized using the cost-to-cost method; time and materials contracts are recognized as services are performed[41](index=41&type=chunk) - Contract assets (costs and estimated earnings in excess of billings) increased by **$2,700 thousand** to **$64,200 thousand** as of March 31, 2023, from **$61,500 thousand** at December 31, 2022[43](index=43&type=chunk) - Contract liabilities (billings in excess of costs and estimated earnings) increased by **$900 thousand** to **$44,900 thousand** as of March 31, 2023, from **$44,000 thousand** at December 31, 2022[46](index=46&type=chunk) - Net overbilling position for contracts in process was **$(7,200) thousand** as of March 31, 2023, an improvement from **$(10,200) thousand** at December 31, 2022[47](index=47&type=chunk) - Remaining performance obligations as of March 31, 2023: GCR **$285,700 thousand**, ODR **$101,200 thousand**. Approximately **56% of GCR** and **72% of ODR** obligations are expected to be recognized as revenue in the remainder of 2023[50](index=50&type=chunk) [Note 4 – Goodwill and Intangibles](index=15&type=section&id=Note%204%20%E2%80%93%20Goodwill%20and%20Intangibles) Reports carrying amounts of goodwill and intangible assets, primarily ODR-related, and associated amortization - Goodwill remained at **$11,400 thousand** as of March 31, 2023, and December 31, 2022, entirely associated with the ODR segment[52](index=52&type=chunk) - No impairment charges were recognized on goodwill or intangible assets during the three months ended March 31, 2023, and 2022[53](index=53&type=chunk) Intangible Assets (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Total amortized intangible assets | $4,997 | $5,380 | | Total unamortized intangible assets (Trade name – Limbach) | $9,960 | $9,960 | | **Total intangible assets, excluding goodwill** | **$14,957** | **$15,340** | * Total amortization expense for definite-lived intangible assets was **$400 thousand** for both periods[54](index=54&type=chunk)[55](index=55&type=chunk) [Note 5 – Debt](index=16&type=section&id=Note%205%20%E2%80%93%20Debt) Details long-term debt, including term loans, finance leases, interest rates, and covenant compliance Long-term Debt (in thousands) | Obligation | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | A&R Wintrust Term Loan | $19,596 | $21,453 | | Finance leases | $5,716 | $4,954 | | Financing liability | $5,351 | $5,351 | | **Total debt** | **$30,663** | **$31,758** | | Less: Current portion | $(9,643) | $(9,564) | | Less: Unamortized discount/costs | $(641) | $(666) | | **Long-term debt** | **$20,379** | **$21,528** | - The A&R Wintrust Term Loan interest rate was **9.00%** at March 31, 2023, compared to **4.50%** at March 31, 2022. The weighted average annual interest rate for the three months ended March 31, 2023, was **8.68%** (vs. **4.29%** in 2022)[63](index=63&type=chunk) - No borrowings were outstanding under the A&R Wintrust Revolving Loan as of March 31, 2023, and December 31, 2022[71](index=71&type=chunk) - The Company was in compliance with all financial maintenance covenants of the A&R Wintrust Loans as of March 31, 2023[72](index=72&type=chunk) - A sale-leaseback transaction for the Pontiac Facility was accounted for as a financing transaction (finance lease) due to the significance of lease payments, resulting in a financing liability of **$4,900 thousand** (net of issuance costs) as of March 31, 2023[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) - In July 2022, the Company entered into an interest rate swap agreement with a notional amount of **$10,000 thousand** and a fixed interest rate of **3.12%** to manage variable-rate debt risk. It is not designated as a hedge for accounting purposes[69](index=69&type=chunk) [Note 6 – Equity](index=19&type=section&id=Note%206%20%E2%80%93%20Equity) Describes authorized shares, warrants, incentive plans, and the share repurchase program, detailing equity activities - Authorized shares: **100,000,000 common stock** (**$0.0001 par value**) and **1,000,000 preferred stock** (**$0.0001 par value**)[79](index=79&type=chunk) Outstanding Warrants | Warrant Type | March 31, 2023 | December 31, 2022 | | :---------------------------- | :------------- | :---------------- | | $15 Exercise Price Sponsor Warrants | 600,000 | 600,000 | | Merger Warrants ($12.50 exercise price) | 629,643 | 629,643 | | **Total** | **1,229,643** | **1,229,643** | - The Omnibus Incentive Plan was amended in March 2022 to increase authorized shares by **350,000** to a total of **2,600,000 shares**[83](index=83&type=chunk) - A Share Repurchase Program of up to **$2,000 thousand** was approved in September 2022, valid through **September 29, 2023**. As of March 31, 2023, approximately **$2,000 thousand** of common stock had been repurchased[85](index=85&type=chunk) - The Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase common stock at an **85% fair market value discount**. **10,997 shares** were issued in January 2023, and **395,620 shares** remain available[86](index=86&type=chunk) [Note 7 – Fair Value Measurements](index=20&type=section&id=Note%207%20%E2%80%93%20Fair%20Value%20Measurements) Explains fair value determination for financial instruments, including debt, contingent consideration, and interest rate swaps - The fair value of financial instruments like cash, receivables, and payables approximates carrying amounts due to short-term maturities[89](index=89&type=chunk) - The fair value of the A&R Wintrust Term Loan was **$19,600 thousand** as of March 31, 2023, determined using discounted estimated future cash flows (Level 3 inputs)[89](index=89&type=chunk) - Contingent consideration for the Jake Marshall Transaction (Earnout Payments) may reach **$6,000 thousand**. A net increase of **$100 thousand** in estimated fair value was recorded for Q1 2023, with an estimated exposure of **$5,500 thousand** at March 31, 2023[90](index=90&type=chunk) - Earnout Payments are valued using the Monte Carlo Simulation method (Level 3 measurement) with a discount rate of **10.2%** as of March 31, 2023[91](index=91&type=chunk) - The interest rate swap's fair value was approximately **$200 thousand** (asset) as of March 31, 2023, recognized in other assets. A loss of **$200 thousand** was recognized in Q1 2023 due to changes in fair value (Level 2 measurement)[92](index=92&type=chunk) [Note 8 – Earnings per Share](index=21&type=section&id=Note%208%20%E2%80%93%20Earnings%20per%20Share) Presents basic and diluted earnings per share calculations, including the impact of dilutive and antidilutive securities Earnings Per Share (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $2,993 | $(1,516) | | Weighted average shares outstanding – basic | 10,475 | 10,421 | | Impact of dilutive securities | 565 | — | | Weighted average shares outstanding – diluted | 11,040 | 10,421 | | Basic EPS | $0.29 | $(0.15) | | Diluted EPS | $0.27 | $(0.15) | Antidilutive Securities Excluded from Diluted EPS (in thousands) | Security Type | March 31, 2023 | March 31, 2022 | | :-------------------------- | :------------- | :------------- | | Out-of-the-money warrants | 600 | 1,230 | | Service-based RSUs | — | 71 | | Performance and market-based RSUs | — | 87 | | Employee Stock Purchase Plan | 2 | 4 | | **Total** | **602** | **1,391** | [Note 9 – Income Taxes](index=22&type=section&id=Note%209%20%E2%80%93%20Income%20Taxes) Details income tax provision (benefit) and effective tax rates for the periods, noting the U.S. federal statutory rate Income Tax Provision (Benefit) and Rate (in thousands, except percentages) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Income tax provision (benefit) | $622 | $(616) | | Income tax rate | 17.2% | 28.9% | - The U.S. federal statutory tax rate was **21%** for both periods[98](index=98&type=chunk) - No valuation allowance was required as of March 31, 2023, or December 31, 2022[99](index=99&type=chunk) [Note 10 – Operating Segments](index=23&type=section&id=Note%2010%20%E2%80%93%20Operating%20Segments) Provides financial information for GCR and ODR operating segments, reflecting the revised management assessment approach - The Company operates in two segments: General Contractor Relationships (GCR) and Owner Direct Relationships (ODR)[100](index=100&type=chunk) - Segment presentation was revised following a CEO transition in January 2023 to align with the new CODM's assessment based on segment revenue and gross profit; SG&A and interest expense are no longer allocated to segments[102](index=102&type=chunk) Condensed Consolidated Segment Information (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | **Revenue:** | | | | GCR | $62,291 | $71,932 | | ODR | $58,718 | $42,890 | | **Total revenue** | **$121,009** | **$114,822** | | **Gross profit:** | | | | GCR | $10,318 | $8,358 | | ODR | $15,909 | $9,982 | | **Total gross profit** | **$26,227** | **$18,340** | | Selling, general and administrative | $21,050 | $18,734 | | Operating income (loss) | $4,653 | $(793) | [Note 11 – Leases](index=25&type=section&id=Note%2011%20%E2%80%93%20Leases) Outlines lease arrangements for real estate and equipment, including related assets, liabilities, and costs - The Company leases real estate, trucks, and other equipment, electing not to separate non-lease components from lease components[106](index=106&type=chunk)[107](index=107&type=chunk) - A related party operating lease for land and facilities has a **10-year term** with options to extend, with base rent escalating from **$37,500/month** to **$45,000/month**[108](index=108&type=chunk) - A Southern California sublease agreement generated approximately **$300 thousand** and **$200 thousand** in income (recorded in SG&A) for the three months ended March 31, 2023 and 2022, respectively[110](index=110&type=chunk) - The Pittsburgh office lease was terminated early in March 2022, resulting in a termination fee of approximately **$700 thousand** and a **$100 thousand** loss on disposal of leasehold improvements[111](index=111&type=chunk)[112](index=112&type=chunk) Lease Amounts on Condensed Consolidated Balance Sheets (in thousands) | Asset/Liability | Classification | March 31, 2023 | December 31, 2022 | | :-------------------------- | :-------------------------- | :------------- | :---------------- | | Operating lease right-of-use assets | Operating | $18,055 | $18,288 | | Property and equipment, net | Finance | $8,118 | $7,402 | | Current operating lease liabilities | Current Operating | $3,639 | $3,562 | | Current portion of long-term debt | Current Finance | $2,214 | $2,135 | | Long-term operating lease liabilities | Noncurrent Operating | $15,374 | $15,643 | | Long-term debt | Noncurrent Finance | $8,853 | $8,170 | | **Total lease assets** | | **$26,173** | **$25,690** | | **Total lease liabilities** | | **$30,080** | **$29,510** | Lease Costs on Condensed Consolidated Statements of Operations (in thousands) | Cost Type | Classification | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------- | :-------------------------------- | :-------------------------------- | | Operating lease cost | Cost of revenue | $561 | $694 | | Operating lease cost | Selling, general and administrative | $645 | $704 | | Finance lease amortization | Cost of revenue | $631 | $651 | | Finance lease interest | Interest expense, net | $66 | $66 | | **Total lease cost** | | **$1,903** | **$2,115** | Weighted Average Lease Terms and Discount Rates | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Weighted average lease term (Operating) | **6.80 years** | **6.98 years** | | Weighted average lease term (Finance) | **2.96 years** | **2.73 years** | | Weighted average discount rate (Operating) | **4.88%** | **4.76%** | | Weighted average discount rate (Finance) | **5.67%** | **5.06%** | [Note 12 – Commitments and Contingencies](index=28&type=section&id=Note%2012%20%E2%80%93%20Commitments%20and%20Contingencies) Discusses legal proceedings, surety bonds, multi-employer pension plans, and self-insurance liabilities - The Company is involved in various legal proceedings arising in the ordinary course of business, but management believes the ultimate resolution will not have a material adverse effect on financial position[117](index=117&type=chunk) - A complaint filed by Bernards Bros. Inc. alleging damages over **$3,000 thousand** is ongoing; a loss was deemed probable as of December 31, 2022, and an estimated loss contingency was recorded[118](index=118&type=chunk) - Surety bonds outstanding totaled approximately **$109,400 thousand** as of March 31, 2023, securing payment and performance obligations[120](index=120&type=chunk) - Many craft labor employees are covered by collective bargaining agreements requiring contributions to multi-employer pension plans (MEPPs). Some MEPPs are in 'critical' status, but no significant liabilities are currently known[121](index=121&type=chunk) - The Company is substantially self-insured for workers' compensation and general liability claims (**$250 thousand per occurrence deductible**, **$4,400 thousand aggregate limit**) and for medical/dental claims (annual stop-loss limits)[122](index=122&type=chunk)[123](index=123&type=chunk) Self-Insurance Liability (in thousands) | Liability Type | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Current liability — workers' compensation and general liability | $188 | $158 | | Current liability — medical and dental | $461 | $557 | | Non-current liability | $569 | $343 | | **Total liability** | **$1,218** | **$1,058** | | Restricted cash | $113 | $113 | [Note 13 – Management Incentive Plans](index=29&type=section&id=Note%2013%20%E2%80%93%20Management%20Incentive%20Plans) Details the Omnibus Incentive Plan, including various RSU types and associated stock-based compensation expense - The Omnibus Incentive Plan authorizes **2,600,000 shares** for equity awards, including options, stock appreciation rights, restricted shares, RSUs, and performance-based awards[126](index=126&type=chunk) - Service-based RSUs vest ratably over three years (or one year for some non-employee directors). Stock-based compensation expense for these was **$400 thousand** for both Q1 2023 and Q1 2022[127](index=127&type=chunk) - Performance-based RSUs (PRSUs) are earned based on company performance against metrics like adjusted EBITDA and EPS growth over three years. Expense for PRSUs was **$700 thousand** in Q1 2023 (vs. **$200 thousand** in Q1 2022)[129](index=129&type=chunk)[130](index=130&type=chunk) - Market-based RSUs (MRSUs) expired on July 16, 2022, as the market condition (stock price achieving **$18.00** over **80 consecutive trading days**) was not met[132](index=132&type=chunk)[133](index=133&type=chunk) - Total recognized stock-based compensation expense was **$1,100 thousand** in Q1 2023 (vs. **$600 thousand** in Q1 2022). Unrecognized expense for unvested RSUs was **$6,200 thousand** at March 31, 2023, expected to be recognized over **2 years**[134](index=134&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of Q1 2023 financial condition and operating results, covering business, segment performance, and liquidity [Overview](index=32&type=section&id=Overview) Describes Limbach's business as an integrated building systems solutions firm and its strategic market focus - Limbach is an integrated building systems solutions firm specializing in HVAC, mechanical, electrical, plumbing, and control systems for commercial, institutional, and light industrial markets[137](index=137&type=chunk) - The Company is winding down its Southern California GCR and ODR operations in 2023 to improve profitability and geographic focus, while remaining obligated under a sublease agreement through **April 2027**[137](index=137&type=chunk) - Core market sectors include Healthcare, Data Centers, Industrial and light manufacturing, Higher Education, Cultural and entertainment, and Life sciences[139](index=139&type=chunk) [Key Components of Condensed Consolidated Statements of Operations](index=32&type=section&id=Key%20Components%20of%20Condensed%20Consolidated%20Statements%20of%20Operations) Explains primary drivers and accounting treatment for revenue, cost of revenue, SG&A, and other income/expenses - Revenue is primarily from fixed-price construction contracts (cost-to-cost method) and time and materials service contracts (as services performed)[139](index=139&type=chunk) - Cost of Revenue includes labor, equipment, material, subcontract, and other job costs, with historical fluctuations as a percentage of contract revenue[141](index=141&type=chunk) - Selling, General and Administrative (SG&A) expenses cover personnel costs for administrative, estimating, HR, safety, IT, legal, finance, and accounting, plus non-personnel costs like travel and professional fees[142](index=142&type=chunk) - Change in fair value of contingent consideration relates to the remeasurement of Earnout Payments from the Jake Marshall Transaction, reported as a separate component of operating income[143](index=143&type=chunk) - Amortization of Intangibles includes periodic non-cash charges for favorable leasehold interests and customer relationships, with an additional **$5,700 thousand** recognized from the Jake Marshall Transaction[144](index=144&type=chunk) - Other (Expenses) Income primarily consists of interest expense, losses on disposition of property/equipment, early lease termination, and changes in fair value of interest rate swaps[145](index=145&type=chunk) - Provision for Income Taxes is calculated based on the estimated annual effective tax rate, using the asset and liability method[147](index=147&type=chunk) [Operating Segments](index=34&type=section&id=Operating%20Segments) Describes GCR and ODR operating segments and how their performance is assessed by management - The Company manages its business in two operating segments: GCR and ODR, with performance assessed by the CODM based on segment revenue and gross profit[148](index=148&type=chunk)[150](index=150&type=chunk) - Segment presentation was restated to conform to the current CODM's review, which no longer allocates SG&A or interest expense to segments[150](index=150&type=chunk)[151](index=151&type=chunk) [Comparison of Results of Operations for the three months ended March 31, 2023 and 2022](index=34&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20three%20months%20ended%20March%2031%2C%202023%20and%202022) Compares consolidated and segment-level financial performance, including revenue, gross profit, and expenses, for Q1 2023 vs Q1 2022 Consolidated Operating Results (in thousands, except percentages) | Metric | Three Months Ended March 31, 2023 | % of Revenue | Three Months Ended March 31, 2022 | % of Revenue | | :-------------------------- | :-------------------------------- | :----------- | :-------------------------------- | :----------- | | Total revenue | $121,009 | 100.0% | $114,822 | 100.0% | | Total gross profit | $26,227 | 21.7% | $18,340 | 16.0% | | Selling, general and administrative | $21,050 | 17.4% | $18,734 | 16.3% | | Operating income (loss) | $4,653 | 3.8% | $(793) | (0.7)% | | Total consolidated income before income taxes | $3,615 | 3.0% | $(2,132) | (1.9)% | | Net income (loss) | $2,993 | 2.5% | $(1,516) | (1.3)% | Revenue by Segment (in thousands, except percentages) | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change ($) | Change (%) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | GCR | $62,291 | $71,932 | $(9,641) | (13.4)% | | ODR | $58,718 | $42,890 | $15,828 | 36.9% | | **Total revenue** | **$121,009** | **$114,822** | **$6,187** | **5.4%** | Gross Profit by Segment (in thousands, except percentages) | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change ($) | Change (%) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | GCR | $10,318 | $8,358 | $1,960 | 23.5% | | ODR | $15,909 | $9,982 | $5,927 | 59.4% | | **Total gross profit** | **$26,227** | **$18,340** | **$7,887** | **43.0%** | | Total gross profit as % of consolidated total revenue | 21.7% | 16.0% | | | - SG&A expense increased by **$2,300 thousand** (**12.4%**) to **$21,100 thousand** in Q1 2023, primarily due to a **$1,900 thousand** increase in payroll-related expenses, **$800 thousand** in CEO transition costs, and **$500 thousand** in stock compensation expense, partially offset by decreases in rent and professional fees[157](index=157&type=chunk) - A **$100 thousand** loss was recorded for the change in fair value of contingent consideration in Q1 2023, attributable to the timing and probability of meeting gross profit margins[159](index=159&type=chunk) - Total other expenses decreased by **$300 thousand** (**22.5%**) to **$1,000 thousand** in Q1 2023, mainly due to an **$800 thousand** loss from early termination of the Pittsburgh operating lease in 2022, partially offset by increased interest expense[161](index=161&type=chunk) - Income tax provision was **$600 thousand** in Q1 2023 (**17.2% effective rate**) compared to a **$600 thousand** benefit in Q1 2022 (**28.9% effective rate**)[162](index=162&type=chunk) [GCR and ODR Backlog Information](index=36&type=section&id=GCR%20and%20ODR%20Backlog%20Information) Presents GCR and ODR backlog, indicating future revenue expectations and strategic shifts - GCR backlog decreased to **$285,700 thousand** at March 31, 2023, from **$302,900 thousand** at December 31, 2022, reflecting an intentional focus on smaller, higher-margin projects[164](index=164&type=chunk)[165](index=165&type=chunk) - ODR backlog increased to **$120,200 thousand** at March 31, 2023, from **$108,200 thousand** at December 31, 2022, driven by continued focus on accelerated growth in the ODR business[166](index=166&type=chunk) - Approximately **$261,000 thousand** of the total backlog at March 31, 2023, is expected to be recognized as revenue over the remainder of 2023[167](index=167&type=chunk) [Market Update](index=37&type=section&id=Market%20Update) Discusses current market conditions, including demand, inflation, supply chain issues, and rising interest rates - The Company is experiencing strong demand but faces challenges from global economic conditions, inflationary costs, supply chain disruptions, COVID-19, and the Russia-Ukraine conflict[168](index=168&type=chunk) - Elevated cost inflation is expected to persist in 2023, partially mitigated by pricing actions, supply chain improvements, and cost savings[168](index=168&type=chunk) - Rising interest rates are expected to increase interest expense in 2023[168](index=168&type=chunk) - Prolonged delays in critical equipment could lead to project terminations, materially impacting business[169](index=169&type=chunk) [Outlook](index=37&type=section&id=Outlook) Outlines 2023 strategic priorities: profitability, ODR growth, workforce investment, and GCR project selectivity - Strategic focus for 2023 includes improving profitability and operating cash flows, emphasizing ODR-related work, investing in the workforce, and improving GCR project execution through selectivity[170](index=170&type=chunk) - The Company aims to expand owner-direct relationships and leverage them to deliver a broad suite of services, focusing on mission-critical systems customers[171](index=171&type=chunk)[172](index=172&type=chunk) - Plans to increase cash flow and operating income by acquiring strategically synergistic companies to address capability gaps and enhance service offerings[173](index=173&type=chunk) - Actively reducing risk and exposure to large, complex, non-owner direct projects due to unfavorable industry pricing and risks[175](index=175&type=chunk) [Seasonality, Cyclicality and Quarterly Trends](index=38&type=section&id=Seasonality%2C%20Cyclicality%20and%20Quarterly%20Trends) Explains how weather and cyclical patterns influence construction project productivity and maintenance operations - Severe weather can impact productivity on construction projects, shifting revenue and gross profit recognition[176](index=176&type=chunk) - Maintenance operations are affected by mild or severe weather, with increased demand during severe conditions[176](index=176&type=chunk) - Operations experience mild cyclicality, with increased maintenance and capital projects in the third and fourth calendar quarters[176](index=176&type=chunk) [Effect of Inflation and Tariffs](index=38&type=section&id=Effect%20of%20Inflation%20and%20Tariffs) Addresses fluctuating material costs, supply chain delays, and mitigation strategies employed by the company - Prices of products like steel, pipe, copper, and equipment are subject to fluctuation and increases, materially impacting results[177](index=177&type=chunk) - Experienced higher material costs and supply chain delays in 2022 and Q1 2023, expected to persist[177](index=177&type=chunk) - Mitigation strategies include incorporating cost escalation factors into bids, limiting bid acceptance time, and using fixed-price purchase orders[177](index=177&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses cash flow, working capital, available funding, and ability to meet short- and long-term financial obligations - Liquidity needs primarily relate to working capital, capital expenditures, and strategic investments, historically funded by operating activities and borrowings[178](index=178&type=chunk) Summary Cash Flow Information (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $9,366 | $(2,965) | | Net cash used in investing activities | $(822) | $(130) | | Net cash (used in) provided by financing activities | $(3,169) | $6,685 | | Net increase in cash, cash equivalents and restricted cash | $5,375 | $3,590 | - Operating cash flows increased by **$12,300 thousand** period-over-period, primarily due to a **$44,300 thousand** cash inflow from changes in accounts receivable, including a **$10,000 thousand** claim resolution[183](index=183&type=chunk) - Investing activities used **$800 thousand** in Q1 2023, mainly for property and equipment purchases[184](index=184&type=chunk) - Financing activities used **$3,200 thousand** in Q1 2023, including term loan payments, taxes for equity awards, and finance lease payments[186](index=186&type=chunk) Summarized Working Capital Information (in thousands, except ratios) | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Current assets | $212,256 | $225,990 | | Current liabilities | $(142,497) | $(159,085) | | Net working capital | $69,759 | $66,905 | | Current ratio | 1.49 | 1.42 | Available Funding Capacity (in thousands) as of March 31, 2023 | Item | Amount | | :-------------------------- | :------------ | | Cash & cash equivalents | $41,376 | | Net credit agreement capacity available (A&R Wintrust Revolving Loan) | $20,830 | | **Total available funding capacity** | **$62,206** | - The Company believes its current cash, expected cash from operations, and available credit facility will be sufficient to meet short- and long-term capital requirements for at least the next 12 months[179](index=179&type=chunk)[190](index=190&type=chunk) - Surety bonds outstanding decreased to **$109,400 thousand** at March 31, 2023, from **$129,600 thousand** at December 31, 2022. The Company has an **$800,000 thousand** bonding capacity[192](index=192&type=chunk) - The Company participates in approximately **40 multiemployer pension plans** (MEPPs) and could incur withdrawal liabilities if it ceases or significantly reduces contributions, though the amount and timing are uncertain[195](index=195&type=chunk)[197](index=197&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Limbach Holdings, Inc. is not required to provide market risk disclosures - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[198](index=198&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2023, with no material internal control changes - Disclosure controls and procedures were evaluated and deemed effective as of **March 31, 2023**[199](index=199&type=chunk) - No material changes in internal control over financial reporting occurred during the period[200](index=200&type=chunk) - Management acknowledges inherent limitations in control systems, which cannot provide absolute assurance of achieving desired objectives[201](index=201&type=chunk) [Part II](index=44&type=section&id=Part%20II) Contains other information, including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 12 of the financial statements for detailed information regarding legal proceedings - Refer to Note 12 for details on legal proceedings[204](index=204&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the company's most recent Annual Report on Form 10-K - No material changes from risk factors disclosed in the Annual Report on Form 10-K for the year ended **December 31, 2022**[205](index=205&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the company's **$2,000 thousand** share repurchase program, fully utilized by March 31, 2023, with no Q1 2023 repurchases - Share Repurchase Program of up to **$2,000 thousand** approved in September 2022, valid through **September 29, 2023**[206](index=206&type=chunk) - As of March 31, 2023, approximately **$2,000 thousand** of common stock was repurchased under the program[206](index=206&type=chunk) - No shares were repurchased during the three months ended March 31, 2023[206](index=206&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Confirms that the company reported no defaults upon senior securities during the period - No defaults upon senior securities[207](index=207&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States that this item is not applicable to the company's operations - Not applicable[208](index=208&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) Reports on the new Second Amended and Restated Credit Agreement, increasing the revolving credit facility and repaying the prior term loan - On **May 5, 2023**, the Company entered into a Second Amended and Restated Credit Agreement[209](index=209&type=chunk) - The new agreement provides a **$50,000 thousand** senior secured revolving credit facility, an increase of **$25,000 thousand**, with a maturity date of **February 24, 2028**[209](index=209&type=chunk) - The outstanding principal balance of the A&R Wintrust Term Loan was repaid using proceeds from the new revolving loan, after a prior **$9,600 thousand** repayment with cash on hand[209](index=209&type=chunk) - As of **May 8, 2023**, **$10,000 thousand** was outstanding under the Second A&R Wintrust Revolving Loan[209](index=209&type=chunk) - The new revolving loan bears interest at Term SOFR (with a **0.15% floor**) plus **3.10%** or Prime Rate (with a **3.0% floor**), subject to a **50 basis point step-down** based on the Senior Leverage Ratio[210](index=210&type=chunk) - The agreement includes customary representations, warranties, covenants, and events of default, with financial maintenance covenants for senior leverage ratio, fixed charge coverage ratio, and unfinanced capital expenditures[212](index=212&type=chunk)[213](index=213&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including corporate governance, employment agreements, and the new credit agreement - Includes corporate governance documents (Certificate of Incorporation, Bylaws)[216](index=216&type=chunk) - Contains promotion letters for Michael M. McCann, Jay Sharp, and Nick Angerosa, and an employment transition agreement for Charles A. Bacon, III[216](index=216&type=chunk) - Lists the Limbach Facility Services LLC Performance Bonus Plan for Executives[216](index=216&type=chunk) - Includes the Second Amended and Restated Credit Agreement dated **May 4, 2023**, as Exhibit 10.6[216](index=216&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are provided[216](index=216&type=chunk) [Signatures](index=47&type=section&id=SIGNATURES) The report is duly signed by Limbach Holdings, Inc.'s President and CEO, and Executive Vice President and CFO - Signed by Michael M. McCann, President and Chief Executive Officer (Principal Executive Officer)[219](index=219&type=chunk) - Signed by Jayme L. Brooks, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)[219](index=219&type=chunk) - Date of Signature: **May 8, 2023**[219](index=219&type=chunk)

Financial Performance & Guidance - FY2022 revenue reached $496.8 million, with a net income of $6.8 million and diluted EPS of $0.64[4] - Adjusted EBITDA for FY2022 was $31.8 million, and the market cap was $148 million as of February 28, 2023[4] - The company had $36 million in cash and equivalents as of December 31, 2022, with zero net debt[4] - Q4 2022 ODR revenue was $79.5 million, a 13.1% year-over-year increase[23] - FY2023 Adjusted EBITDA is projected between $33 million and $37 million[101] Business Strategy & Evolution - The company is transitioning from a project-based business to a building systems solutions partner[5] - The company is shifting towards Owner Direct Relationships (ODR), with a target gross margin range of 25-28%[27, 68] - ODR revenue increased from approximately 21% in 2019 to approximately 44% in 2022, with an expected 50/50 split in 2023[82] - The company completed a $2 million share repurchase program during Q4 2022[5] Market & Growth Drivers - Strong sector tailwinds are driven by building owners focusing on ROIC and maintenance of existing facilities[5] - The company aims to accelerate growth in high-margin businesses and expand geographically[17] - The company is focused on data-driven decision-making to improve margins and provide value to customers[78]

Limbach Holdings, Inc. (NASDAQ:LMB) Q4 2022 Earnings Conference Call March 9, 2023 9:00 AM ET Company Participants Jeremy Hellman - IR Charlie Bacon - President and CEO Jayme Brooks - CFO Michael McCann - COO and Incoming-CEO Conference Call Participants Rob Brown - Lake Street Capital Chip Moore - EF Hutton Operator Greetings, and welcome to Limbach Holdings Fourth Quarter and Full Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will fo ...