Limbach Holdings, Inc. Q2 FY2025 earnings call

Key Initiatives - ODR Business: ODR revenue as a percentage of total revenue has increased from 21% in Q2 2019 to 76.6% in Q2 2025. For the first half of 2025, ODR represented 72.4% of total revenue, in line with the 2025 guidance of 70% - 80%. - Sales Team Expansion: Scaled the sales organization over the last year with 40 new salespeople, and hired Amy Dorsett as Senior Vice President of Sales. Amy brings over 20 years of sales experience from major OEMs. - M&A Activity: Completed the acquisition of Pioneer Power in July, which aligns with acquisition criteria, brings specialized expertise in core verticals, expands footprint in the Midwest, and extends reach in the Upper Midwest. - Vertical Market Updates: In healthcare, deferred maintenance drives repair work and proactive discussions for future spending; in industrial manufacturing, performing upgrades and labor for shutdowns; in Life Science and Higher Education, maintaining essential systems and minimizing downtime. - Business Strategy Shift: Transitioning from reactive support to proactive partnership, which may take 6 - 12 months, involving facility assessments, etc. Expanding service portfolio, e.g., expanding climate control rental fleet and offering digital solutions for building systems.

In the second quarter of 2025, total revenue was $142.2 million, up 16.4% from the year - ago period. ODR revenue rose 31.7% to $108.9 million, which was a quarterly record, and accounted for 76.6% of total revenue. GCR revenue declined 15.7%. Total gross profit increased by 18.9% from $33.5 million to $39.8 million. Consolidated gross margin was 28%, up from 27.4% in 2024. ODR gross profit was $31.6 million, accounting for 79.3% of total gross profit, and increased by $6.2 million or 24.6%. GCR gross profit increased $0.1 million or 1.1% with a margin of 24.7% compared to 20.6% in the prior year.

2025 Guidance - Full - year revenue is anticipated to be between $650 million and $680 million, and adjusted EBITDA is projected in the range of $80 million to $86 million. - Integration efforts with Pioneer are on track, and revenue and adjusted EBITDA contributions are not expected to be evenly distributed between the third and fourth quarters, with a heavier weighting towards Q4. - For full year 2025, target a free cash flow conversion rate of at least 75% and expect CapEx to have a run rate of approximately $4 million, excluding an additional investment of $3.5 million in rental equipment for 2025, with $2.1 million occurring in the first half of the year.

Risks - Macro - economic uncertainty: Performance varies across end markets, and ongoing macroeconomic uncertainty could impact business. - Integration risk: Uncertainties during the Phase 1 integration of Pioneer, such as getting systems in place and implementing gross profit benchmarking. - Sales team ramp - up risk: Potential slower - than - expected ramp - up of new salespeople, especially in translating technical sales to financial sales. - Vertical market dependence: Over - reliance on specific verticals could expose the company to sector - specific fluctuations.

Q: Maybe we can start with gross margin. So specifically on the GCR side, I think 24.7% last 2 quarters. I was modeling a pretty good decline moving forward. And I just -- I know you've got higher quality projects. I just wonder how we should be thinking about them this year and next year, kind of ultimately, what's a normalized level there?

A: Yes. Just from a high - level perspective, we've been really focused, like you said, on the quality to make sure that whatever work that gets sold from a GCR perspective, those opportunities are embedded, they make sense for the overall business as well, too, proper risk management, a lot of stuff that we've learned over the years as well, too. So that's part of, obviously, from a margin perspective. But Jayme, do you want to touch upon long term for the rest of the year? Jayme L. Brooks: Yes, if you look back over the past year, it will ebb and flow by each quarter. So from a long - term perspective, we really only guide to the total -- the gross profit line as being that 28% to 29% for 2025. And so you just see it ebb and flow based on how the projects burn in each quarter.

Q: Just wanted to get your kind of sense on the demand environment, how it's trending and sort of where you're seeing some of the strength in the business?

A: Yes. So -- and maybe just to kind of look back from a vertical market perspective, our model, and I think we've learned this more and more, is really about employing proactive sales. There's -- we're working with customers that have to spend money. They have to repair. Getting them to think not just reactive but proactive. I think that's one thing that we are really super focused. So you think about it from a health care perspective, they have to make the repair. But discussing with them, setting up from a capital program perspective, that's something that we really have to work with. And just an example that we gave in the prepared remarks was we had a national health care customer that we're doing assessments on about 20 locations. And this is when I think the combination of from a local relationship turns into a national relationship and really expands from a capital program. That's 20 different locations across our footprint and nationally that allows us to have access in the future. So much of our strategy really relies on short - term actions turning into long - term demand. And those type of relationships, I think, are really going to allow us to really capitalize that and to have a sustainable long - term revenue source from these customers.

Q: Just a quick question on the guidance. Does the change only reflect the contribution from PPI? Or was the organic kind of base number tweaked a little bit lower here as well? And if so, what drove the organic change?

A: Yes. So from the guidance perspective, a lot of this has to do from a Pioneer Power. It's our largest acquisition as a public company. So we want to make sure the initial projections are conservative from a measured perspective. And I think as we go from kind of continue from a Phase 1 perspective and kind of the steps that I talked about before, we're going to kind of take a look at that as we go forward.

Q: Just a quick question on the ODR backlog, it fell a little bit sequentially here. Is there anything to call out as notable drivers? And just curious if you're seeing any sort of change in the demand environment or if this is more of just kind of a timing issue on the backlog?

A: Yes. No, I think it's really timing based. I think we have -- the backlog is a component of it. It's not the only component because we could end up burning work. It could be time and material work that goes very quickly through. I think what we're seeing is, again, I feel like it's our ability with customers that have to spend. That doesn't mean that it automatically translates to revenue from us from our perspective. So I definitely think from a sales perspective, we're continuing to learn. I think one thing, too, that from our team, we've recently hired our Senior Vice President of Sales, Amy Dorsett. So I think our ability to translate OpEx into CapEx, this hire has been a long time coming, but I think that's going to be something that's really pivotal from a go - to - market perspective as well to using our expertise from various OEMs companies and to add a different element. I think a lot of times with customers, it's translating that technical type sale into a financial sale that involves return on investment type calculations. It's almost like a different language for our sales team. So I think that's going to be a big thing. as we go to '26 and '27 looking ahead from a sales perspective.