LMB - Earnings call transcript Q4 2023

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Operator

Good morning, and welcome to the Fourth Quarter and Fiscal Year 2023 Limbach Holdings Earnings Conference Call and Webcast. [Operator Instructions]

I will now turn the conference over to your host, Julie Kegley of Financial Profiles.

You may begin.

Julie Kegley

Good morning, and thank you for joining us today to discuss Limbach Holdings' financial results for the fourth quarter and fiscal year 2023. earnings ended filed December its for Form issued period the XX, Limbach release its and XX-K Yesterday, XXXX. company's Relations Both updated documents of Investor investor an limbachinc.com. the section presentation are as available on well website at as the today's Management investors and its to may in encourages presentation call slides the refer select entirety. to during review

today's Officer. Michael Jayme McCann, on Vice President Executive Brooks, and and Chief me With Financial President call are Chief and Executive Officer;

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

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

profit identified contemplated such facts operating anticipate historical phrases. by forward-looking also Forward-looking those by statements results margins believe, words that intend, Statements will, such expect, as are differ are other and and comparable materially Actual words from in statements. such as statements not be, may statements. about are forward-looking or improvement expected

cause results today's is non-GAAP difference Limbach's XX-K discussion will that material reports on on Please in of and statements to referring be forward-looking we a measures. these Form XX-Q. company's could note the contained filings, to including that factors the call, SEC A some in compared

on to find X-K investor be in of reconciliation can non-GAAP most Form SEC. Limbach's Investor release these on measures has found You comparable furnished directly with presentation, and GAAP our measures been earnings the quarter can fourth the and which website Relations the

McCann. over Mike call With the that, I now will to turn

Michael McCann

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

a building and engineering opportunity an knowledge system saw solutions leverage service to we construction and ago, our years few A firm. experience, relationships pure-play build to

partnering returns owners provide Through twofold: competitive, are mission-critical and critical building into to stronger, with owners into services our more operations We maintain company. and solutions less to today, Limbach a mechanical, and/or resilient for need solutions first, of uninterrupted to greater stockholders; volatile execution margins we higher a maintain and Our building a markets, building value-added services while provide second, and with position owners Limbach their electrical delivering facilities. disciplined was to infrastructure. objective plumbing to strategy, this upgrade to command to their partner transfer in creating

on an vertical We key business with are healthcare, large and centers, entertainment. segments. systems focused are education manufacturing, science, option. X and in industrial operate higher sustainable data markets: We X where is demand These not markets failure growing drivers life cultural

building over contractors. with work now Relationships Our to Owner our where provide General directly solutions, In total segment where our owners or work GCR, Contractor Direct system accounts which directly with Relationships we segment we building or for ODR, XX% of revenue. general

growing on reasons. our business ODR focused are for We several

decision our to First, give access us customer key makers. relationships direct

and be may have engagement initial the proposition value While opportunity a small, to relationships. strong the build long-term we

cost saving As we their at near-term collaborating customized on-site we're energy develop efficiencies. the drive strategies positions handle become embedded into develop solutions the with often risk maintenance mitigation reduce time, teams our and that customers' and to same needs, This cost us businesses, future. for to

margins. By systems to an ODR disruption business these we types failure. nightmare, In higher we our with adding them value of indispensable reoccurring their biggest helping time, become generate to over customers, due at can revenue more turn, avoid partner relationships,

our opportunity the to grow decline. projects, this GCR when As more GCR we expect our and as we to business, lower-margin a evaluating become ODR selective revenue result, gives us

owners of building We our with top on each locations. are at our relationships focused X building

Florida one our successful of work ODR multiple relationships. with Our which example target customers developing facilities. have at is opens the A healthcare recent our door mutually-beneficial facilities, to long-term model of

locations. customers small out a for our now X one top they Our are of our engagement, and started as one Florida relationship of

on operational working this where tangible aspects teams customer on we embedded have OpEx on their decisions CapEx site a fully of impact planning goals. can have all closely and and with We

sell our pure executing and strategy who as are traditional equipment managers advantaged from We proprietary an who position between contractors. OEMs generalists, property act

to the improve integrity on unbiased is where provide plumbing opportunities system, analysis objective value. and HVAC, engineered entire objective systems. their and Our add recommendations to we This including is electrical, and

customers continue ensure significant as optimal believe recommend to know relationships. business Our to expand opportunities service. We ODR has our our solutions we growth goals cost-effective to organic uninterrupted customer our

we solutions and earnings equipment grow is our customers. for XXXX, share rental invested This portable For example, market our and a million to critical with release, provide customers. press strategic as investment our expand our system $X approximately have I existing indicated HVAC in in to in offerings urgent service

good for acquisitions supporting are geographic cultural disciplined acquiring also criteria: take most are and growth capabilities, a to selective long-term meet a important importantly, ODR strategy X our that and our component a key our companies footprint service they fit. We an plan. Strategic and growth expanding approach

shareholder that acquisition teams textile manufacturing track acquisitions our in new expanded caliber Industrial owner-direct We that successful Industrial along XXXX, ODR manufacturing acquisitions, XXX Air making with will facilities. that's drive acquisitions: provided made Carolina, vertical. ACME Air. Fortune that additional our and growth customer relationships with create consumer follow geographic and And North with customers a value. a establishing goods strategic was strategy. relationships of tuck-in We are Industrial profitability in we record footprint ACME X providing specific organic and and believe on-premise

see cash maintaining create accelerating ahead XXXX, definitive XX.X% I'd outlined how revenue XXXX to I've flow significant success for ODR schedule, our that as great GCR of the strategy our our The a of about and strong accounted Limbach had we ODR shift mix to value, while by target. shift growth demonstrated from a full sheet strategy. because XX% ODR which we talk company year. exceeding balance like year evidence of our Now earnings of and mix our for

accounting of year more XX% than for we for revenue We ODR XX.X% quarter. the exited the target fourth revenue are great the towards progress 'XX ODR our making as XXXX, with

our for total XX% expanded margin projects. year, the target XXX exceeding in The XX.X% to also XXXX as by our our focus we to were XX% were XX%. in range of honed gross to basis which from year, points XX.X% margins the XX% GCR range quick-hitting gross of target XX% XX% the margins for in exceeded XXXX. ODR We high-margin on

I'll Jayme now I commentary. to before Jayme? to with over detailed turn it additional financial highlights provide return

Jayme Brooks

Mike. Thank you,

provide release of earnings Our fourth and details which filed comprehensive press company's quarter were financials. the yesterday, and XX-K, Form XXXX

focus full year fourth and XXXX So the I will on quarter highlights.

revenue XX.X% GCR as revenue and $XXX.X $XXX.X towards ODR the In ODR. our we up During mix consolidated declined XXXX. XX.X% versus million million shift revenue, declined the as Consolidated XXXX. XX.X% grew executed consolidated we and XX.X% revenue ODR quarter, of of revenues from revenues in quarter, in by was generated strategy fourth X.X%

in For $XXX.X the generated of year, we consolidated million XXXX. million compared revenue to $XXX.X

revenue to with million were on ODR year-over-year. declined accounted profit on gross XX.X% in XXXX. revenue higher XX.X% up grew versus for GCR XX.X% gross driven revenue flat as revenue gross at $X.X to in decreased or Revenue consolidated in gross a year, by the expanded our due increased ODR grew and up XX% quick-turning margins XX.X% GCR ODR fourth for XXXX. focus Gross from consolidated of XX.X% high-quality lower revenue XX.X% XXXX. X.X%. QX XX% The with million projects. from profit XX.X%, X.X% $X.X quarter XX.X%, in margin basis margin revenue for the was or GCR

increase in by For basis or an the margins. increased gross profit consolidated margin profit expanded XX%, margins or XXXX. million driven higher due gross XX.X% GCR year, a XXXX. in up from XX.X% on increased gross of and in million XX.X% from $XX XX.X%, $X.X was gross XX% to ODR revenue

versus for in to XXXX. Although margin revenue year declined GCR gross XX.X% the in the segment, expanded XX%

mentioned I earlier, XX.X% the of quarter. for revenue made consolidated the up As ODR segment

shift However, quarter. XX% the or total $XX.X the This the ODR million the segment contributed is mix gross dollars profit of strategy. for

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

As was revenue, up XX.X% of expense in XXXX. from a percentage XX.X%, SG&A

smaller ODR there well incentive-related a incurred Industrial strategy takes, puts with the some and expense as by associated and as was primarily result accelerating the and While ACME of increase expenses Air. our higher payroll acquisitions are of driven as

$X.X For XXXX. $XX.X by to the approximately million $XX.X compared to year, SG&A for expense million million, increased

of strategy, result an ODR percentage XXXX. was payroll The expense was up stock-based higher XX.X%, accelerating XX.X% in primarily of with acquisitions. SG&A in driven from expense a and our by as associated increase ACME increase and a revenue, and incurred As Industrial compensation incentive-related expenses expenses the

to business to XX% revenue For XXXX, drive in our SG&A XX% to continue to ODR growth. as a expense be of as targeting around we invest percentage are we

strategy investment $X.X from Adjusted bills year, year. million Interest for Adjusted agreements, and for X.X% $X.X Interest million and quarter and $XX.X EBITDA the up the driven overnight expense X.X% million QX funds. for repurchase fourth in million treasury cash was income placing X.X% million $X.X $X the for for in and to the the in by our was and EBITDA excess for company's XXXX. $XX.X was the margin fourth quarter quarter was U.S. compared XXXX. market money million,

adjusted net $XX.X X.X% year was diluted of XXXX. in exceeded or from XXXX. XX.X% million. XX.X% EBITDA For and income per This EPS. XX.X% to to the was million $XX $XX.X $X.XX growth the in Adjusted diluted million margin the $XX EBITDA $X.X guidance growth for X.X% million diluted $X.X we or EBITDA adjusted XXXX year, share represents quarter up our was million in in million, for and fourth to XXXX, Net income per compared compared in $X.XX share

net $X.XX diluted share in representing diluted or net income or For income $X.X in XXX.X% year, per compared EPS. was growth per XXX% $X.XX and million in to growth diluted the million $XX.X share XXXX,

to flow. Turning cash

in for flow XXXX. flow XX.X% increase. for XXXX, XX.X% XX.X%. year expenditures quarter representing cash to flow as net changes conversion a cash operating of million $XX.X defined $XX.X compared activities, in year cash operating in year flow during cash million was XXX%. capital the compared in income flow million $XX.X compared fourth The XX.X% of the XXXX, cash was less adjusted XX.X% a Our and increase over free million $XX.X of an working the to XXXX, Free cash from representing conversion EBITDA to $XX.X was the in capital million increase. was Operating flow, $XX.X versus Free was million for

which divided operations rental free we of flow which EBITDA. excluding as $X XX%, For million, equipment, rate XXXX, our currently changes define expenditures, cash in we cash minus capital, approximately from capital conversion a minus adjusted in investment continuing is approximately by working are flow target to

strategy. CapEx We rate of expect in our of acceleration approximately for the investment the rental primarily run ODR because a of $X equipment to have XXXX, excluding million,

At and end equivalents debt cash net million. Turning and the cash of in to $XX.X short- million had of of and $XX.X debt, our sheet. balance QX, we long-term discount

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

I Now closing Mike will turn back remarks. to for it

Michael McCann

Thank you, Jayme.

XXXX cover opening Before up year considerations. to call I'll our the modeling guidance and questions, full

XXXX, we XX% of For for are to we the to million; expect be revenue ODR targeting help full $XX of end million. XX% XX%. revenue to million of EBITDA modeling, year XXXX; $XX million XX% to segment the adjusted mix with to GCR to $XXX between with And and by $XXX being

As we with XXXX. profit XX% revenue continue selective gross we the shift land expect between and to projects, XX% margins GCR to total to be for

half is for level is first usually back is business. first the demand fourth stronger and than some seasonality repair, quarter there's and year to than build The of the quarter half. always stronger there and the usually Although our the maintenance of

momentum expect the the and see also maintenance projects and continue strong first forefront. tailwinds gain coming quarter, because to EBITDA capital after to we deferred from We to revenue secular

in and are XXXX innings we was achievement. a We significant growth of long-term year the our of believe opportunity. early

progress organically X growing about mix our need excited strategic are We as as evolved the continued our for are on strategy. to market growth to positioned expanding continue well share XXXX acquisitions. of margins pillars through shift and We through all and offerings by

Finally, I want to thank all the employees.

in of concludes remarks. the hard our Q&A please and dedication. Our your excellent That work prepared XXXX Operator, was result direct session. a performance begin

Operator

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

Robert Brown

years? see wanted a progress. of the growth to on the playing kind follow a up for few organic growth out organic I business more Congratulations you. just the of next of ODR, How that for bit on sort in do strong kind little you

Michael McCann

Sure.

As our we to end a next is to the XXXX of mentioned to ODR XX% get target by XX% today, mix. earlier

our to much within OpEx upon our X now, So of as right embedding based really our is key the And focus strategy really as possible. we're markets. make into that really our personnel those vertical sure all capturing is facilities

think bow I well, capture CapEx an years, kind look as but too, are in a can to out OpEx, then it and you If only together we we manager. account not thinking future of tie about the how with the

things going as really for customer growth. understands bringing marketplace. So our now Industrial drive a us has is And dependable X it whom very we're from obviously, up to that on, are at healthcare to of industrial are a markets is I and X very the strong look and that's We're too. vertical manufacturing, It's from that a help disciplined very even down are very the to important much. us right -- our Those vertical second usually very we're and manufacturing. markets, market, market. a one too that us, focused vertical to doesn't perspective, the couple vertical capabilities healthcare, well, go been

down relationships growing comes customers really allowing -- of and foundation with strong it period a and that sure these making over we're those time. with building really long-term to those a So

Robert Brown

you a sort there? what maybe you're of rental Okay. expanding the what little doing is? that elaborate some opportunity of about you bit Great. rental doing. business And our on Could expansions talked And you're and service

Michael McCann

a initial Yes, piece X our shift this and offerings always I of talked acquisitions. We've pillar evolved absolutely. pillars: shift, of lot provider to customers. the rental front of strategy, We're having to that, us go of to expanded have strategic But we're acquisitions. is of to source margin mix mix capability excited second will one that the single our end this. just and than more we'd about that had think obviously, about We've us a to day, of supplier allows -- allow having before those much there the fleet at the the in be get And a rental.

$X capture as well, we'll to into Now be to investment the too. the these we've rental additional customers it gross able able million initial quick fleet, that made service to the of comes and offer margin and from

a like it's good fit it's capturing it's with be work. we So value-added for type that offering real that And feel -- and OpEx a customers. to really emergencies our going

Robert Brown

And the demand new maybe in demand more you in service, environment? direct shifting order see But is seeing Okay. on And Great. environment? environment. do know demand helping. question strength overall is of and terms How you're that's to the so are the activity? still I there what much last -- the shift you a in project

Michael McCann

demand The good. still Sure. really is environment

to sector. Sometimes that again, because And think key is on mission-critical I it's we've of type really dependent durable. vertical the market demand that one the reasons these shifted our becomes customers business

best So kind with our is goes explain probably the of a of customer to give couple to strategy kind of examples. way this that

ourselves, the big we're with all life that, this in resources a their our amazing. declared told one thing and comes, of first stick interesting, one But suppliers it's examples front job a is the or us that customer, science going of dedicate ensured markets going And we're that And customer. this is they And clients the and customer was we sat when thing vertical put customer resources it's of our in on. customer And resources one to move you. the we with And that promise. of lot to make leave customer.

you want attention. coming in the think just that POs start I and to see they

able opposed relationship they older services. we're We're working little but And an had the they this nice, to of end Mid-Atlantic trapped, and decent you facility stuck. And sophisticated that felt trapped too. well, what's And our supplier of give had less they're we've healthcare at So like that as giving been expand OEM of the transactional we've they relationship which really market. because a against the one is proprietary customers of competition. I'll products type consultant supplier was in day, was to market as OEM competing competing a not too, -- bit an by the is well, -- felt feel too, where we're against example attention, a a at as them amount the an a the that

So down. always there's And it break I so many different examples.

we customers our to individual to in as markets relationship time. we demand and where vertical need over it upon based Our model durable want And model not possible, comes build macroeconomic is absolutely these really be they based resilient as is down demands. upon becomes individual not -- a these

Operator

comes next Our with of question from the Gerry line Sweeney ROTH Capital.

Gerard Sweeney

a I freshened you some think and some bit customers. I just to of retouch curious mentioned and Rob deep it are wanted your current ODR talked And growth. I of and like, get stick on this, the have topics specifically up. just how I but Mike, to same about had I'm just little with just you wanted

a there's think wallet-share play here. I

So my et more share? How or can maybe of how from have share customers? growth this, then the much with sorry, customers, wallet new And wallet third cetera. just question you come ODR part, existing entrants is new opportunities, this do much is new

Michael McCann

really It's Sure. of early always are a in where that in innings our some we're from said strategy, equates I've basis to sense, interesting. that before the we perspective. customer

to do, talked services to type the have describing And relationships there's our doubt no of desire that mind what we've based upon and we we So customers. have with in want that of tons they to my customers.

it from really grown revenue ODR -- existing a come our expansion where So of we've has from just from lot segment, look from I of at relationships. the that

relationships end very they in the those of of the relationships we're opportunity, customers. that day, long-term we're stages our with the -- have some the want buildings. multiple script, mentioned of this but early targeting in spend at So I much

previously market we a customers, tremendous have always amount kind But I that time. period and have would to there and capital work question, it's time, It's before we So up and example expand that of a example. back OpEx it. those CapEx It's opportunity a period we'll your resources. That builds of small a over perfect around come to demand going tell about make start the you, of used of science that sure us going is to with larger that to to but build to customer a to smaller share. of over there's these to work projects POs to wallet amount continue I share life of lot some share steady there's wallet dedicate as

even recommendations. from a now lot based from opportunity, relationships So -- on a basis, from just a customer of are right new those

building or facility, to that knows and a they everybody people a doing my "Can And share working service. life facility innings. of gain -- science job you healthcare journey. wallet So opportunity well, level a had everybody. there's we good of call and to on We've continue have we as say, in our too?" So to a much started see over share we're it's high tremendous the very early as come And market providing

Gerard Sweeney

be to Got it. opportunities the prime then adjacent is some is example. a expand And services. to follow-up discussing into rental would just this Obviously,

how Just how a still still your focused given what importantly, ODR broader great But I the -- wallet core are business size, appropriate mean to and to cap, go. staying you're as while share on curious think that what decide after go do opportunity? you small opportunities? ODR I also opportunities the decide But pursue? is got what you some do to that you've

Michael McCann

Sure.

is data-driven and related X And offerings, is critical related our is new that our solutions. There equipment out, talks the to that's It's Slide them them we unique we've of of products. really investor different XX about are there's there. which OpEx. Gerry, this the group infrastructure I the in upgrades in X that there's, slide a have CapEx, deck, way rental, kind another MEP offerings. projects, services, think, separated So And to XX or that directly that of

have more the PM doing, that management. there's evolved And our program offering. then We services we're kind of

and we've to do very make kind I it in Got that customers. got our of to sure aligns it's can't So once. I make separated sure mind, with the at measured agree. everything

of OpEx the of thinking for and next type then So year more and evolved very work setting for capital up these this about project really project offerings. smaller ourselves we're much some again, work,

a trying We're So period too do measured over to strategy very time. of at it's a always not much once.

Gerard Sweeney

-- And you projects term, question guidance $XX a $XX sort some there EBITDA and it in 'XX believe on XXXX but that write-ups of it. million better over I had could EBITDA gives in QX, the especially I couple 'XX. apples-to-apples think of quick better on backs I increase Jayme. Obviously, are maybe of, million the a Because from little gave timers bit than front me, right adjusted results. of you for one of I comparison those was one over it side. a lack add-backs the projected add in think of go XXXX? on in I Got to EBITDA increase apologize, -- or in

Jayme Brooks

Gerry. point, Great Yes.

yes, other did upsides And then some that and So we about million, disclose as claim the some that and have was we in adjusted nonrecurring million. some and EBITDA took was then upside $XXX,XXX. that about and about in we would had talk QX, $X.X nonrecurring And then of be also had we $XX.X another that $X.X had million recovery events we we projects an that well. our had also did that we California where from

look that, really you closer one-time you to is take EBITDA at So events. if if out then the adjusted $XX.X total, in those million, like

Operator

no comments. floor back questions you. further like at Thank the There this over turn Michael for to to time. are closing I'd McCann

Michael McCann

Limbach. Thank for at forward look We of Conference to many your all ROTH in week. interest seeing next you continued you the

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

Operator

This concludes today's teleconference.

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

Limbach (LMB) 14 Mar 242023 Q4 Earnings call transcript