Q1 2024 Summary
Published Mar 11, 2025, 6:41 PM UTC- Successful integration of recent acquisitions is driving growth, with ACME Industrial and Industrial Air introducing several new clients and expansion opportunities, contributing to the owner-direct revenue growth.
- Rapid shift to higher-margin Owner Direct Relationships (ODR), increasing ODR revenue to 65%-70% of total revenue for 2024, up from previous guidance, aiming for 80% ODR in the long term, which is expected to further expand margins and accelerate revenue growth.
- Strong focus on mission-critical vertical markets such as healthcare, industrial manufacturing, and data centers, which have durable demand, leading to significant opportunities and driving ODR growth.
- Increased capital expenditures and potential for higher spending may impact cash flows. Limbach is investing $4 million in rental equipment in 2024, with $2 million already spent in Q1, and they may "reassess that listed [and] maybe expand the fleet" further if opportunities arise, potentially increasing capital expenditures beyond the current budget.
- Uncertainty in executing acquisition strategy may hinder growth. The company is being "extremely selective" and "opportunistic" with acquisitions, aiming to find the "right fit" and "right strategic fit," but acknowledges that while there is a "robust pipeline," they "want to get the right deals done." This reliance on suitable acquisitions introduces uncertainty and potential delays in growth if targets are not found or integrations do not proceed smoothly. ,
- Challenges in rapidly achieving optimal ODR mix may delay margin expansion. Limbach aims to reach an 80% ODR mix beyond 2024 and is "moving as fast as possible," investing in sales resources and capital projects. However, this aggressive shift may face operational challenges, and delays could postpone expected margin improvements and revenue growth.
-
Segment Mix Shift
Q: When will you reach the optimized segment mix shift, and where will margins and revenue be then?
A: We're accelerating our transition to a 65% to 70% owner-direct revenue mix, aiming to achieve approximately 80% owner-direct beyond 2024. Attaining this optimal mix will lead to significant margin expansion, bolstered by new service offerings and the right market focus. -
M&A Activity
Q: How active do you expect to be in M&A? Any ideal targets upcoming?
A: We have a robust pipeline and are being selective and opportunistic in pursuing acquisitions. Our goal is to find the right fit that integrates well with Limbach, emphasizing cultural alignment, owner-direct customers, and expansion opportunities. We're pleased with the success of Industrial Air and ACME Industrial and continue to seek similar opportunities. -
Capital Expenditure on Rentals
Q: How much more CapEx will the rental business require?
A: We've allocated $4 million for rental equipment this year. We've already spent $2 million in the first quarter, with the remaining expected in Q2 upon receiving the equipment. As the hotter months approach, we may reassess and potentially expand the fleet if opportunities arise. -
ODR Growth Drivers
Q: What macro themes are driving ODR growth? Is it catch-up spending or new sales efforts?
A: Our ODR growth stems from focusing on six key vertical markets with durable demand. In healthcare, we're capturing deferred maintenance and seeing capital projects reenergize. Industrial manufacturing remains strong, especially in the Midwest and Southeast, aided by recent acquisitions. Data centers offer opportunities due to the need for rapid equipment upgrades. -
Acquisition Integration
Q: How is the integration of ACME and Industrial Air progressing? Any ideal targets in the next 3–9 months?
A: The integration of Industrial Air and ACME Industrial is going well, thanks to key factors like cultural fit, an expandable owner-direct base, and new customer penetration. We're actively reviewing opportunities and aim to make the right deals that align with our strategic objectives.