Limbach (LMB) Q2 EPS Jumps 27%

Limbach (LMB -18.22%), a leading provider of mechanical, electrical, and plumbing (MEP) services for building infrastructure, released results for the second quarter of fiscal 2025 on August 5, 2025. The big headline is that non-GAAP earnings per share came in at $0.93, easily topping the analyst consensus of $0.77 (non-GAAP). Gross profit, net income (GAAP), and adjusted EBITDA (non-GAAP) all posted double-digit percentage gains. Revenue (GAAP), at $142.2 million, missed estimates by 1.4% but was up from the prior year. Management’s outlook for the year was raised, with guidance for both revenue and adjusted EBITDA moving higher. The quarter reflected continued strategic progress, but a sharp drop in operating cash flow and increased deal-related expenses highlight some areas for monitoring.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Understanding Limbach’s Business and Recent Focus

Limbach specializes in maintaining and servicing MEP systems in critical facilities such as hospitals, data centers, life sciences labs, and industrial sites. Its services support building infrastructure through installation, engineering, maintenance, and upgrade projects. The main focus is on relationships with building owners—Limbach’s Owner Direct Relationships (ODR) segment—where it provides recurring service and capital project support across the lifespan of a building’s systems.

In the past several years, Limbach has shifted its business toward ODR. This move is designed to create more stable, higher-margin revenue sources by working directly with facility owners. Alongside this, Limbach has grown through acquisitions of regional MEP contractors, selectively integrating them to expand reach and offerings. The company now intentionally downplays its lower-margin General Contractor Relationships (GCR) segment, prioritizing ODR growth, margin expansion, and enhancements to recurring services. Developing human capital, investing in sales talent, and fostering an inclusive culture are also key success drivers.

Quarter in Review: Segment Growth, Margin Shift, and Notable Moves

The quarter demonstrated clear progress toward Limbach's mix-shift and profitability goals. ODR revenue climbed 31.7% from the prior year, reaching $108.9 million in ODR revenue and representing 76.6% of total revenue, up from 67.7% in Q2 2024. This shift means Limbach is generating more business from its owner direct customers—clients it can serve with repeat maintenance, lifecycle upgrades, and capital projects. ODR gross profit rose 24.6% to $31.6 million, and the segment contributed 79.3% of Limbach's total gross profit.

ODR segment margin, which measures profit as a percentage of segment revenue, dipped to 29.0% versus 30.6% in Q2 2024. Management explained this decrease as a return to normal after some one-time, positive project write-ups benefited Q2 2024 results. The GCR segment, which involves working as a subcontractor for general contractors on construction projects, shrank as planned. Revenue there declined 15.7%, while GCR segment margin improved to 24.7% from 20.6% in Q2 2024. This improvement came from being more selective about which projects to pursue, focusing on profitability over volume.

Profitability metrics were robust. Net income (GAAP) was $7.8 million, a 30.2% increase from the prior-year result. Adjusted EBITDA, a metric used to assess recurring operating performance by removing items like non-cash expenses and one-time charges, surged 30.0% year-over-year. Overall, Limbach’s gross margin (GAAP) improved 60 basis points to 28.0%, thanks to the shift toward higher-margin ODR business and careful selection of GCR work.

Notably, strategic acquisitions contributed to these results. Recent purchases of regional firms like Kent Island Mechanical and Consolidated Mechanical began to add to both ODR and GCR segment revenue during the period. A larger deal for Pioneer Power, Inc.—closed just after the quarter—brought a $66.1 million commitment, combining cash and credit facility borrowing. The company’s approach is to integrate acquired entities using proven management systems and expand their full-service ODR offerings. While acquisitions fuel growth and scale, they also introduce integration risks. Investors are watching for evidence that newly acquired businesses deliver on projected returns.

Limbach continues to invest significantly in its sales organization, an area highlighted as fundamental for deepening ODR penetration and expanding national account relationships. Selling, general, and administrative expenses rose $3.5 million to $26.6 million, primarily reflecting increases in professional services fees, payroll-related expenses, and stock-based compensation. Despite this increase, SG&A as a percent of revenue fell to 18.7% from 19.0%, signaling better operating leverage. Over the past two years, about 40 new sales professionals joined, mostly as account managers deployed at large ODR clients to secure more business and strengthen client ties. The company’s model emphasizes repeat engagement and cross-selling, aiming to transition relationships from basic maintenance contracts to encompassing larger capital projects and engineered solutions.

The one area of concern was a sharp drop in operating cash flow, which fell to $2.0 million from $16.5 million in Q2 2024. The company’s cash balance at June 30, 2025 was $38.9 million, down about $6 million from December 31, 2024. Total debt remains low relative to equity, though the Pioneer Power, Inc. acquisition will increase balance sheet leverage in the periods to come.

Limbach’s core markets include healthcare, industrial and manufacturing, data centers, life sciences, higher education, and cultural and entertainment. These sectors demand reliable, ongoing maintenance of critical infrastructure, providing a level of insulation from broader swings in the construction market. The company’s “national account” growth initiative aims to scale up from local relationships to cross-regional partnerships, connecting services for major clients with widespread operations. Management believes there is significant opportunity to grow wallet share within its current client base by deepening these relationships and expanding to new metropolitan areas, typically through bolt-on acquisitions or targeted hires.

Looking Ahead: Management Guidance and Key Focus Areas

Limbach raised its full-year guidance, reflecting confidence in ongoing growth and profitability drivers. Revenue is now expected to land in a range of $650 million to $680 million, up from previous guidance of $610 million to $630 million. Adjusted EBITDA is expected in a range of $80 million to $86 million, up from the prior $78 million to $82 million. Management expects stronger performance in both revenue and profits, driven by continued ODR segment expansion, recently completed acquisitions, and investments in sales and lifecycle service offerings.

For investors following the company, the focus in coming quarters will be on consistent ODR segment growth, continued improvement in margins, as evidenced by consolidated gross margin expansion from 23.1% in 2023 to 27.8% in 2024, and further to 28.0% in Q2 2025. Sustained cash flow conversion will also be important, as the recent period highlighted significant volatility in cash from operations. As explained by management, successful synergy realization from recent deals, sales force productivity gains, and the ability to maintain or grow ODR segment margins are all areas to watch closely over the remainder of the year.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.