{ "docId": "019dd923-622c-750b-8b99-b80c260b0389", "docSlug": "dee45f9e8542", "documentTitle": "Limbach Holdings, Inc. (LMB)", "authorId": "54_Spruce_Point_Capital", "authorName": "Spruce Point Capital Management", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2025-07-22 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 12, "pageCount": 86, "prevPage": 11, "nextPage": 13, "slideType": "executive_summary", "function": "summarize", "density": "dense", "nDataPoints": 3, "notes": "This is a research note from Spruce Point Capital Management, likely part of a short-thesis presentation.", "elementsJson": [ "paragraph", "callout_box" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b99-b80c260b0389/12", "deckHref": "/decks/019dd923-622c-750b-8b99-b80c260b0389", "deckJsonHref": "/decks/019dd923-622c-750b-8b99-b80c260b0389.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b99-b80c260b0389#slide-12", "components": [ { "bbox": { "h": 0.035, "w": 0.96, "x": 0.02, "y": 0.475 }, "kind": "callout", "text": "We Believe Limbach Overstates Free Cash Flow by Excluding Key Uses Of Cash", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "64e5eca1-3608-45f4-83e1-8a7cd6b681f2", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "Free Cash Flow: $37 million", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd953-5370-75b3-9c60-f095c9534645", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.32, "w": 0.96, "x": 0.02, "y": 0.17 }, "kind": "paragraph", "text": "Similarly, restructuring charges have appeared with enough frequency to suggest they are recurring, not exceptional. Limbach has taken restructuring charges related to exiting its Southern California operations since 2022. We also observe how a subtle change in how Limbach reports stock-based compensation for its Adj. EBITDA calculation may allow the Company to add cash compensation expenses to Adj. EBITDA. We believe this already happened in Q1'25 when the $2 million of stock-based compensation the Company added back to Adj. EBITDA was $0.4 million greater than the $1.6 million of non-cash stock-based compensation Limbach reported on its cash flow statement. This was the first period this delta existed. Since management's cash bonuses are tied to Adj. EBITDA, management has a clear incentive to flatter it, and we believe this subtle change may allow them to do that.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "288f3c06-3433-4493-90b7-d9d0ed104420", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.45, "w": 0.96, "x": 0.02, "y": 0.51 }, "kind": "paragraph", "text": "We believe Limbach's reported free cash flow is significantly overstated as it excludes some key recurring uses of cash. First, the Company excludes all working capital (\"WC\") changes from its FCF calculation, which in some periods can be a significant use of cash. We believe WC changes should be included in Limbach's FCF calculation because as a contractor primarily using cost-to-cost accounting, its GAAP earnings are heavily influenced by management estimates, and working capital is where the financial reality of project execution ultimately shows up. Limbach even removed WC as a consideration for management's incentive comp after 2020, which concerns us considering its material impact. Like with Adj. EBITDA, we also believe Limbach's free cash flow should be adjusted for finance lease costs. Since the interest portion of finance leases already runs through operating cash flow, we only need to factor in the principal payment, which shows up in the financing section of the cash flows statement. Limbach also excludes contingent consideration payments from its FCF calculation; given these are cash payouts tied to performance milestones, we believe they are economically similar to incentive compensation and should be factored into FCF. The Company's FCF calculation also ignores rental equipment purchases and taxes paid related to equity awards, both tied to ongoing business operations. In total, we believe the exclusion of these uses of cash from the Company's FCF calculation has allowed Limbach to overstate FCF by over $37 million in the last 12 months alone.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4c65d61c-703d-4d34-89f5-1256f701fc0c", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.045, "w": 0.365, "x": 0.318, "y": 0.055 }, "kind": "title", "text": "Executive Summary, Cont'd.", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "eb1b5f52-13b5-4463-b294-8bec1c98db14", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Executive summary", "slug": "executive-summary", "agent": null, "layer": "slide", "matchId": "d1b4c227-9c17-4d46-a1b6-02671a5e0029", "evidence": "This slide is an executive summary, which is a common section in business presentations.", "confidence": 0.9 } ], "frameworks": [], "arcBeats": [ { "to": 19, "from": 5, "beatId": "32ad1395-b980-4b6c-83f9-8323d778a736", "arcName": "Problem-Agitate-Solution", "arcSlug": "problem-agitate-solution", "beatName": "Problem & Complication", "beatSlug": "consultants-gambit-problem-complication", "evidence": "The document highlights several problems and complications with Limbach's financials and operations, including connections to high-profile fraud cases and generous stock-based compensation", "position": 0, "confidence": 0.8, "parentBeatName": "Complication", "parentBeatSlug": "complication" } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }