Limbach Holdings, Inc.LMB
Limbach Holdings, Inc. Revenue Disclosure
Revenue from Contracts with Customers
The Company generates revenue from construction type contracts, primarily consisting of fixed-price contracts, to deliver mechanical, plumbing, and electrical construction services to its customers. The duration of its contracts generally ranges from three months to two years. Revenue from fixed price contracts is recognized on the cost-to-cost method, measured by the relationship of total cost incurred to total estimated contract costs. Revenue from time and materials contracts is recognized as services are performed. The Company believes that its extensive experience in mechanical, plumbing, and electrical projects, and its internal cost review procedures during the bidding process, enable it to reasonably estimate costs and mitigate the risk of cost overruns on fixed price contracts.
The Company generally invoices customers on a monthly basis, based on a schedule of values that breaks down the contract amount into discrete billing items. Costs and estimated earnings in excess of billings on uncompleted contracts are recorded as a contract asset until billable under the contract terms. Billings in excess of costs and estimated earnings on uncompleted contracts are recorded as a contract liability until the related revenue is recognizable. The Company classifies contract assets and liabilities that may be settled beyond one year from the balance sheet date as current, consistent with the length of time of the Company’s project operating cycle.
Contract assets
Contract assets include costs and estimated earnings in excess of billings on uncompleted contracts and amounts due under retainage provisions. The components of the contract asset balances as of the respective dates were as follows:
| (in thousands) | December 31, 2024 | December 31, 2023 | Change | ||||||||||||||
| Contract assets | |||||||||||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 27,304 | $ | 29,247 | $ | (1,943) | |||||||||||
| Retainage receivable | 20,245 | 22,443 | (2,198) | ||||||||||||||
| Total contract assets | $ | 47,549 | $ | 51,690 | $ | (4,141) | |||||||||||
Retainage receivable represents amounts invoiced to customers where payments have been partially withheld, typically 10%, pending the completion of certain milestones, satisfaction of other contractual conditions or the completion of the project. Retainage agreements vary from project to project and balances could be outstanding for several months or years depending on a number of circumstances such as contract-specific terms, project performance and other variables that may arise as the Company makes progress towards completion.
Contract assets represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset. Contract assets result when either: (1) the appropriate contract revenue amount has been recognized over time in accordance with ASC Topic 606, but a portion of the revenue recorded cannot be currently billed due to the billing terms defined in the contract, or (2) costs are incurred related to certain claims and unapproved change orders. Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change.
Unapproved change orders occur when a change in the scope of work results in additional work being performed before the parties have agreed on the corresponding change in the contract price. The Company routinely estimates recovery related to claims and unapproved change orders as a form of variable consideration at the most likely amount it expects to receive and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Claims and unapproved change orders are billable upon the agreement and resolution between the contractual parties and after the execution of contractual amendments. Increases in claims and unapproved change orders typically result from costs being incurred against existing or new positions; decreases normally result from resolutions and subsequent billings.
The current estimated net realizable value on such items as recorded in contract assets and contract liabilities in the consolidated balance sheets was $10.9 million and $19.5 million as of December 31, 2024 and 2023, respectively. The Company currently anticipates that the majority of such amounts will be approved or executed within one year. The resolution of those claims and unapproved change orders that may require litigation or other forms of dispute resolution proceedings may delay the timing of billing beyond one year.
Contract liabilities
Contract liabilities include billings in excess of contract costs and estimated earnings on uncompleted contracts and provisions for losses. The components of the contract liability balances as of the respective dates were as follows:
| (in thousands) | December 31, 2024 | December 31, 2023 | Change | ||||||||||||||
| Contract liabilities | |||||||||||||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | $ | 44,417 | $ | 41,987 | $ | 2,430 | |||||||||||
| Provisions for losses | 102 | 173 | (71) | ||||||||||||||
| Total contract liabilities | $ | 44,519 | $ | 42,160 | $ | 2,359 | |||||||||||
Billings in excess of costs and estimated earnings on uncompleted contracts represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date. The balance may fluctuate depending on the timing of contract billings and the recognition of contract revenue.
Provisions for losses are recognized in the consolidated statements of operations at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue.
The net (overbilling) underbilling position for contracts in process consisted of the following:
| (in thousands) | December 31, 2024 | December 31, 2023 | |||||||||
| Revenue earned on uncompleted contracts | $ | 618,153 | $ | 551,120 | |||||||
| Less: Billings to date | (635,266) | (563,860) | |||||||||
| Net (overbilling) underbilling | $ | (17,113) | $ | (12,740) | |||||||
| (in thousands) | December 31, 2024 | December 31, 2023 | |||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 27,304 | $ | 29,247 | |||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | (44,417) | (41,987) | |||||||||
| Net (overbilling) underbilling | $ | (17,113) | $ | (12,740) | |||||||
Revisions in Contract Estimates
The Company recorded revisions in its contract estimates for certain ODR and GCR projects. During the year ended December 31, 2024, the Company recorded material gross profit write-ups on four ODR segment projects for a total of $3.9 million that had a net gross profit impact of $0.5 million or more. During the year ended December 31, 2024, the Company recorded material gross profit write-ups on three GCR projects for a total of $3.3 million and material gross profit write-downs on two GCR projects for a total of $1.4 million.
During the year ended December 31, 2023, the Company recorded a material gross profit write-down on one ODR segment project for a total of $1.0 million that had a net gross profit impact of $0.5 million or more. During the year ended
December 31, 2023, the Company recorded material gross profit write-ups of $2.2 million on two GCR projects and material gross profit write-downs on two GCR projects for a total of $1.3 million.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and exclude unexercised contract options. The Company’s remaining performance obligations include projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions.
As of December 31, 2024, the aggregate amount of the transaction prices allocated to the remaining performance obligations of the Company's ODR and GCR segment contracts were $204.1 million and $140.0 million, respectively. The Company currently estimates that 85% and 72% of its ODR and GCR segment remaining performance obligations as of December 31, 2024, respectively, will be recognized as revenue during 2025, with the substantial majority of remaining performance obligations to be recognized within 24 months, although the timing of the Company’s performance is not always under its control.
Additionally, the difference between remaining performance obligations and backlog is due to the exclusion of a portion of the Company’s ODR agreements under certain contract types from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time by the Company or the customer without considerable cost incurred by the customer.
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About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.