WARRENDALE, Pa. - Limbach Holdings, Inc. (NASDAQ:LMB), a provider of building systems solutions, has announced the acquisition of Kent Island Mechanical, LLC (KIM) in a move to enhance its service offerings in the Greater Washington, D.C. metro area. The initial purchase price for KIM, a company known for its expertise in complex building systems maintenance, was $15 million.
The acquisition is expected to bolster Limbach's capabilities in design, engineering, maintenance, and emergency solutions, particularly for mission-critical facilities such as data centers, healthcare institutions, life sciences, and higher education. KIM's workforce and business model are seen as complementary to Limbach's current operations in the Mid-Atlantic region, with an anticipated contribution of approximately $30 million in revenue and over $4 million in EBITDA annually starting in 2025.
Limbach funded the acquisition from available cash and has structured the deal to include performance-based, contingent earn-outs totaling $5 million, potentially payable over the next two years. This strategic move is seen as aligning with Limbach's focus on expanding Owner Direct Relationships (ODR) with clients that manage mission-critical facilities.
Michael McCann, President and CEO of Limbach, expressed enthusiasm about integrating the KIM team and leveraging their strong customer relationships. He emphasized the expected modest impact on revenue and earnings in 2024, with a primary focus on operational integration and synergy realization in 2025. McCann also noted that Limbach has completed over $50 million in transaction value through strategic acquisitions without issuing stock as consideration for these transactions.
Mark Bowen, the founder of KIM, expressed confidence in the acquisition, stating his team is joining a company that shares their core values and vision. Kyle Benjamin, KIM's Director of Operations, will join Limbach's Mid-Atlantic leadership team.
This acquisition marks a significant step for Limbach as it continues to seek additional opportunities that align with its strategic goals and create value for stakeholders. The information regarding this acquisition is based on a press release statement from Limbach Holdings, Inc.
In other recent news, Limbach Holdings Inc. has reported a significant shift in its operational strategy, leading to robust financial results for the second quarter of 2024. The company's pivot towards maintenance, repairs, and upgrades of existing buildings has resulted in a substantial increase in its owner direct revenue (ODR), now making up 67.7% of total revenue. This strategic shift has contributed to a record gross margin of 27.4% and a rise in net income and cash flow.
The company also announced a strong outlook for the year, expecting adjusted EBITDA to be between $55 million and $58 million. Despite a decrease in GCR gross profit due to lower revenue, ODR gross profit accounted for 75.7% of total gross profit, a significant increase from the previous year.
Limbach Holdings' CEO, Michael McCann, discussed the company's three-pillar strategy for EBITDA margin expansion, including a shift to ODR, evolving service offerings for higher margins, and strategic acquisitions. These recent developments suggest a period of strong financial performance and significant advancements in Limbach Holdings' service offerings and market presence.
InvestingPro Insights
In light of Limbach Holdings, Inc.'s (NASDAQ:LMB) recent acquisition of Kent Island Mechanical, LLC, a closer look at the company's financial health and market performance offers valuable insights. One notable InvestingPro Tip is that Limbach is trading at a low P/E ratio relative to near-term earnings growth, suggesting that the stock might be undervalued based on expected earnings. This could be particularly relevant for investors considering the potential for increased earnings following the integration of KIM into Limbach's operations.
Additionally, Limbach's strategic move to expand in the Greater Washington, D.C. metro area may be bolstered by the fact that the company holds more cash than debt on its balance sheet. This financial stability could provide flexibility and support for the company as it seeks to realize synergies from its latest acquisition.
From a data perspective, Limbach's market capitalization stands at $728.58M USD, reflecting the company's size and market value. The P/E ratio, a measure of the company's current share price relative to its per-share earnings, is 27.45, while the forward-looking P/E ratio for the last twelve months as of Q2 2024 is 25.41. This forward P/E ratio indicates what investors are willing to pay today for a share relative to the earnings growth expected in the near future. Moreover, with a Price/Book ratio of 5.48 for the same period, it shows that the market values the company at a premium to its book value, which can be a sign of investors' confidence in its future growth prospects. These metrics, coupled with the recent acquisition, paint a picture of a company that is actively managing its growth trajectory and financial standing.
For those interested in deeper analysis, there are additional InvestingPro Tips available on the InvestingPro platform, providing further insights into Limbach's performance and potential investment opportunities.
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