Q2 2024 Limbach Holdings Inc Earnings Call

Operator: Good morning, and welcome to the second quarter 2024 Limbach Hldg earnings conference call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. I would now like to turn the call over to your host, Julie Kegley of Financial Profiles. You may now disconnect.

Operator: Good morning and welcome to the second quarter 2024, Limbach Colmings, earnings conference call and webcast. All participants will be in a listen-and-only mode. Should you need assistance? Please signal a conference specialist by pressing the star key, followed by zero.

Speaker Change: Good morning and welcome to the second quarter 2024 Limbach Hldg's earnings conference call and webcast.

Julie Kegley: I would now like to turn the call over to your host, Julie Kegley, a financial profile. You may begin. Good morning, and thank you for joining us today to discuss Limbach Colmings' financial results for the second quarter of 2024. Yesterday, Limbach Colmings issued its earnings release and filed its Form 10-Q for the period ended June 30, 2024. Both documents, as well as an updated investor presentation, are available on the investor relations section of the company's website at limbaching.com. Management may refer to select slides during today's call and encourages investors to review the presentation in its entirety.

Julie Kegley: Good morning, and thank you for joining us today to discuss Limbach Hldg's financial results for the second quarter of 2024. Yesterday, Limbach Hldg issued its earnings release and filed its Form 10-Q for the period ended June 30, 2024.

Speaker Change: You may begin.

Julie Kegley: Both documents as well as an updated investor presentation are available on the investor relations section of the company's website at limbachinc.com. Management may refer to select slides during today's call and encourages investors to review the presentation in its entirety. With me on today's call are Michael McCann, President and Chief Executive Officer, and Jayme Brooks, Executive Vice President and Chief Financial Officer.

Speaker Change: Both documents as well as an updated investor presentation are available on the investor relations section of the company's website at limbachinc.com. Management may refer to select slides during today's call and encourages investors to review the presentation in its entirety.

Julie Kegley: With me on today's call, are Michael McCann, President and Chief Executive Officer, and Jamie Brooks, Executive Vice President and Chief Financial Officer. We will begin with prepare remarks and then open up the call for analyst questions.

Speaker Change: With me on today's call are Michael McCann, President and Chief Executive Officer, and Jayme Brooks, Executive Vice President and Chief Financial Officer. We will begin with prepared remarks and then open up the call for analyst questions.

Julie Kegley: We will begin with prepared remarks and then open up the call to analyst questions. Before we begin, I would like to remind you that today's comments will include forward-looking statements under federal securities laws. Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate, or other comparable words and phrases. Statements that are not historical facts, such as statements about expected growth and profit and operating margins, are also forward-looking statements.

Julie Kegley: Before we begin, I would like to remind you that today's comments will include forward-looking statements under federal security laws. Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate, or other comparable words and phrases. Statements that are not historical facts, such as statements about expected growth and profit and operating margins, are also forward-looking statements. Actual results may differ materially from those contemplated by such forward-looking statements. A discussion of the factors that could cause a material difference at the company's results compared to these forward-looking statements is contained in Limbach's SEC filings, including reports on Form 10-K and 10-Q.

Julie Kegley: Actual results may differ materially from those contemplated by such forward-looking statements. Please note that on today's call, we will be referring to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in our second quarter earnings release and in our investor presentation, both of which can be found on Limbach's investor relations website and have been furnished in the Form 8K filed with the SEC. With that, I will now turn the call over to Mike McCann.

Speaker Change: Before we begin, I would like to remind you that today's comments will include forward-looking statements under federal securities laws.

Julie Kegley: Please note that on today's call, we will be referring to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in our second quarter earnings release and in our investor presentation. Both of which can be found on Limbach's Investor Relations website and have been furnished in the form 8-K filed with the SEC.

Speaker Change: Please note that on today's call, we will be referring to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in our second quarter earnings release and in our investor presentation, both of which can be found on Limbach's investor relations website and have been furnished in the forum.

Michael McCann: With that, I will now turn the call over to Mike McCann. Good morning and welcome to our stockholders, analysts, and interested investors. Thanks for joining us today. We are very fortunate that long-term stockholders have been with us for several years, as well as strong interest for new investors in those who are just learning about Limbach.

Michael McCann: Good morning and welcome to our stockholders, analysts, and interested investors. Thanks for joining us today.

Speaker Change: Good morning and welcome to our stockholders, analysts, and interested investors. Thanks for joining us today. We are very fortunate to have long-term stockholders who have been with us for several years as well as strong interest from new investors and those who are just learning about Limbach.

Michael McCann: We are very fortunate to have long-term stockholders who have been with us for several years, as well as strong interest from new investors and those who are just learning about Limbach. So I think it's important to recap our strategy because this is the heart of everything we do as a company, which gives us the opportunity to earn higher margins. At the same time, we're intentionally scaling back our work on new construction projects, which are typically sold through a bidding process that results in lower-margin, higher-risk work.

Michael McCann: So I think it's important to recap our strategy because of the heart of everything we're doing as a company. We have the three-polar strategies change the way we do business and differentiate us in the engineering and construction space. First, we are shifting our focus away from new construction towards maintenance, repairs, and upgrades of mission-critical infrastructure on existing buildings, which lowers our risk profile. Our goal is to work directly with building owners to provide solutions that create value for them, which gives us the opportunity to earn higher margins. At the same time, we are intentionally scaling back our work in new construction projects, which are typically sold through a bidding process that results in lower margin, higher risk work.

Speaker Change: So I think it's important to recap our strategy because this is the heart of everything we're doing as a company.

Speaker Change: First, we are shifting our focus away from new construction towards maintenance, repairs, and upgrades of mission-critical infrastructure on existing buildings, which lowers our risk profile.

Michael McCann: As we shift away from general contract relationships or GCR work, which is primarily in new construction, towards owner direct relationships or ODR work, which are primarily existing facilities.

Speaker Change: As we shift away from General Contractor Relationships, or GCR, work, which is primarily new construction, towards Owner Direct Relationships, or ODR, work, which are primarily existing facilities, we are building a stronger business that can deliver consistent results across economic cycles.

Michael McCann: We are building a stronger business that can deliver consistent results across the economic cycle. As an example, recently one of our data center customers' approaches about performing additional work. Due to our focused account-centric approach, we, in the building, under carved out several existing building capital projects that fit our profile, providing solutions and value to our customers. By executing our strategy, we continue to develop our partnership with our customer and demonstrate its first-hand value that Limbach can bring to the table. Because of this, the building under now deploys our team on the most technical projects at their facility.

Michael McCann: Due to our focused, account-centric approach, we and the building owner carved out several existing building capital projects that fit our profile, providing solutions and value to our customers. By executing our strategy, we continue to develop our partnership with our customers and demonstrate firsthand the value that Limbach can bring to the table. Because of this, the building owner now deploys our team on the most technical projects at their facility. In the first quarter, we set a target for the end of this year. ODR would comprise 65% to 70% of our revenue. During the first half of the year, we invested approximately $4 million in rental equipment for indoor climate control, more specifically air-cooled chillers and air handling units.

Speaker Change: Due to our focused, account-centric approach, we and the building owner carved out several existing building capital projects that fit our profile, providing solutions and value to our customers.

Michael McCann: In the first quarter, we set a target by the end of this year. ODR would comprise of 65 to 70% of our revenue. That compares to 50% last year. For 22, worth 67.7% so we're all in a way to making this strategic transition a reality. We have seen ODR revenue grow at 19.3% Kegler from 2019 to 2023. And believe in the future when the mix of the business hits approximately 80% of ODR in 20% GCR, which would include the impact of acquisitions.

Speaker Change: That compares to 50% last year.

Michael McCann: We see the top-lying total revenue growth and continue margin expansion. The second pillar of our strategy is to further expand growth margins by evolving our service offerings to better support our customers. During the first half of the year, we invested approximately $4 million in rental employment for indoor climate control, more specifically air cool chillers and air handling units. Our customers have often requested equipment procurement assistance from us in the past to avoid downtime. Now we can provide the service directly at attractive margins. This service offering expansion is proving quite successful as we've now deployed the entire fleet.

Speaker Change: During the first half of the year, we invested approximately $4 million in rental equipment for indoor climate control, more specifically air-cooled chillers and air handling units. Our customers have often requested equipment procurement assistance from us in the past to avoid downtime.

Michael McCann: Our customers have often requested equipment procurement assistance from us in the past to avoid downtime. The third pillar of our strategy is scale to business. We can add key service offerings and expand our footprint by making strategic acquisitions. Although it appears we've made limited progress to date, we can assure you that our acquisition pipeline is very strong. We remain disciplined in our selection of targeted companies and our due diligence process to ensure we achieve the right cultural and business fit. It takes time, but the pipeline is robust, and we are not standing still.

Speaker Change: Now we can provide this service directly at attractive margins.

Speaker Change: This service offering expansion has proven quite successful as we have now deployed the entire fleet. We have a three-year plan to layer on additional value-added services as our customers increasingly see us as an essential partner in maintaining their building's critical infrastructure.

Michael McCann: We have a three year plan to lay around additional value added services as our customers increasing the CS as an essential partner in maintaining the building's critical infrastructure. The third pillar of our strategy is scale the business. And key service offerings in expand our footprint by making strategic acquisitions.

Speaker Change: The third pillar of our strategy is scale to business. Add key service offerings and expand our footprint by making strategic acquisitions.

Michael McCann: Although it appears we've made limited progress today, we can assure you that our acquisition pipeline is very strong. We remain disciplined in our selection of targeted companies, in our due diligence process to ensure we achieve the right cultural and business fit. It takes time, but the pipeline is robust, and we are not standing still.

Speaker Change: Although it appears we've made limited progress to date, we can assure you that our acquisition pipeline is very strong. We remain disciplined in our selection of targeted companies and our due diligence process to ensure we achieve the right cultural and business fit. It takes time, but the pipeline is robust and we are not standing still.

Michael McCann: We focus on six key verticals: health care, industrial manufacturing, data centers, life sciences, higher education, and cultural entertainment. These industries require uninterrupted building operations that cannot fail. We provide building owners with solutions and services to maintain and upgrade their mission critical mechanical, electrical, and plumbing of the structure.

Michael McCann: These industries require uninterrupted building operations that cannot fail. We provide building owners with solutions and services to maintain and upgrade their mission-critical mechanical, electrical, and plumbing infrastructure. A customer profile typically falls, Our branch managers focus 80% of their time and energy on their top 5 to 10 key customers.

Speaker Change: These industries require uninterrupted building operations that cannot fail. We provide building owners with solutions and services to maintain and upgrade their mission-critical mechanical, electrical, and plumbing infrastructure.

Michael McCann: We believe we have the right strategy and the right verticals to not only grow earnings while increasing margins, but also improve the quality of our business while simultaneously reducing risk. Our approach to establish strong relationships with our customers. Our customer profile typically falls within our six target vertical markets as a mix of old and new buildings and as a multi-location footprint. They consider their infrastructure to be critical to the operation of their business and will spend money to avoid downtime. In several cases, these building owners have other buildings that overlap with our locations. Our branch managers focus 80% of their time and energy on their top five to ten key customers, which provides diversity to the overall customer base.

Speaker Change: Our approach is to establish strong relationships with our customers.

Speaker Change: Our customer profile typically falls within our six target vertical markets, as a mix of old and new buildings, and as a multi-location footprint. They consider their infrastructure to be critical to the operation of their business, and will spend money to avoid downtime.

Speaker Change: In several cases, these building owners have other buildings that overlap with our locations.

Speaker Change: Our branch managers focus 80% of their time and energy on their top 5 to 10 key customers.

Michael McCann: By geography as well as by market vertical, additionally, each acquisition at a new customer base with the same type of focus on their top customers, which promotes additional diversity.

Speaker Change: which provides diversity to overall customer base by geography as well as by market vertical. Additionally, each acquisition adds a new customer base with the same type of focus on their top customers, which promotes additional diversity.

Michael McCann: As our footprint grows through our position, the ability to capture market share should increase significantly. This approach allows us to capitalize on synergistic opportunities while maintaining a level of diversity to our geographic footprint. As we expand our relationships with these top customers, our business grows, and we've become a more integral part of their operations.

Michael McCann: As our footprint grows through acquisition, the ability to capture market share should increase significantly. As we expand our relationships with these top customers, our business grows, and we've become a more integral part of their operations. Recently, one of our industrial clients needed to improve the environment of their production floor. Limbach presented a proposal that combined the utilization of our rental fleet with a custom design-build infrastructure project solution. These team members manage the account relationships and are on site every day.

Speaker Change: As our footprint grows through acquisition, the ability to capture market share should increase significantly.

Michael McCann: In 2024, we made a major investment in onsite account managers who are focused on learning customer facilities and capturing the operating spend needed in their facilities. Gaining the knowledge of our customer facilities provides us a distinct advantage when the need arises to develop capital projects. Really recently, one of our industrial clients needed to improve the environment of their production floor. Limbach presented a proposal that combined the utilization of our rental fleet with a custom design-build infrastructure project solution. Despite attempts from the owner to obtain better pricing, we presented a value-based solution that cannot be compared and therefore commoditized.

Speaker Change: In 2024, we made a major investment in on-site account managers who are focused on learning customer facilities and capturing the operating spend needed in their facilities.

Speaker Change: Gaining the knowledge of our customers' facilities provides us a distinct advantage when the need arises to develop capital projects. Recently, one of our industrial clients needed to improve the environment of their production floor.

Speaker Change: Limbach presented a proposal that combined the utilization of our rental fleet with a custom design-build infrastructure project solution.

Speaker Change: Despite attempts from the owner to obtain competitive pricing, we presented a value-based solution that could not be compared and therefore commoditized.

Michael McCann: The account manager relationships is key. We are successfully transitioning staff from the GCR side of the business to onsite account managers on the only direct side. These team members manage the account relationships and are onsite every day. This embedded relationship helps us develop trust with the building owner, leading to increased market share by expanding our services from operating spend to capital projects.

Speaker Change: The account manager relationship is key. We are successfully transitioning staff from the GCR side of the business to on-site account managers on the owner direct side.

Speaker Change: These team members manage the account relationships and are onsite every day. This embedded relationship helps us develop trust with the building owner, leading to increased market share by expanding our services from operating spend to capital projects.

Michael McCann: This embedded relationship helps us develop trust with the building owner, leading to increased market share by expanding our services from operating spend to capital projects. Our strategy wouldn't work, however, if we weren't providing value and high-quality work to our customers. Value and quality give us the ability to expand our margins as we shift from GCR to ODR. We expect future margin expansion as we introduce new services.

Michael McCann: Our strategy wouldn't work, however, if we weren't providing value and high quality work to our customers. The value and quality gives us the ability to expand our margins as we shift from GCR to ODR. We expect future margin expansion as we introduce new service offerings.

Speaker Change: Our strategy wouldn't work, however, if we weren't providing value and high-quality work to our customers.

Speaker Change: The value and quality gives us the ability to expand our margins as we shift from GCR to ODR. We expect future margin expansion as we introduce new service offerings.

Michael McCann: Team will get into specifics of our second quarter results, but our record second quarter total gross margin and improve free cash flow conversion are evidence that our strategy is working.

Michael McCann: The alignment of the company's strategy by our amazing employees makes our success possible.

Speaker Change: The alignment and commitment to the company's strategy by our amazing employees makes our success possible.

Jamie Brooks: I'll now turn it over to Jamie to provide more detail financial highlights before I return with additional commentary. Jamie? Thanks, Mike.

Jayme Brooks: Thanks, Mike. Our 2024 second quarter earnings press release in Form 10-Q, which provides comprehensive details of our financial results, was filed yesterday and can be found on our website. I will focus on the highlights from the second quarter. Our ODR backlog at quarter end was $177.7 million compared to $147 million at December 31, 2023. Total gross profit increased 17.5% to $33.5 million for the quarter from $28.5 million in Q2 2023, reflecting our mixed-use strategy to ODR.

Jamie Brooks: Our 2024 second quarter earnings press release informed MQ, which provides comprehensive details of our financial results, were filed yesterday and can be found on our website. I'll focus on the highlights from the second quarter. During the quarter, we generated total revenue of 122.2 million versus 124.9 million in Q2 2023, and as we expected, total revenue declined by 2.1% due to our purposeful shift to our ODR business. ODR revenue improved 40.8% to 82.8 million, while GCR revenue declined 40.3% to 39.5 million. As Mike indicated, the decline in GCR revenue is intentional as we continue to execute our mixes strategy to ODR. In the second quarter, ODR revenue was 67.7% of total revenue, up from 47.1% last year.

Speaker Change: ODR revenue grew 40.8% to $82.8 million, while GCR revenue declined 40.3% to $39.5 million.

Jamie Brooks: This increase from Q2 2023 is driving our gross profit and adjusted EBITDA results. Our ODR backlog at quarter end was 177.7 million compared to 147 million at December 31, 2023. GCR backlog was 151.6 million compared to 186.9 million. The increase in ODR backlog and decrease in GCR backlog are due to our continued focus on accelerating the growth of our high margin ODR business. It's important to keep in mind, however, that backlog in the ODR segment does not reflect our full book of business. As many ODR projects are short term in nature and get sold and completed before becoming part of the backlog at the end of the quarter.

Speaker Change: GCR backlog was $151.6 million compared to $186.9 million at December 31st.

Speaker Change: It's important to keep in mind, however, that Backlog is the ODR segment does not reflect our full book of business, as many ODR projects are short-term in nature and get sold and completed before becoming part of the Backlog at the end of the quarter.

Jamie Brooks: Total growth profit increased 17.5% to 33.5 million for the quarter from 28.5 million in Q2 2023. Reflecting our mixing strategy to ODRs. ODR growth profits comprise 75.7% of total growth profit dollars, or 25.4 million. ODR growth profit increased 8.1 million, or 47.1%. Driven by higher revenue with expanded growth margin in Q2 to 30.6% versus 29.3% in Q2 of 2023. GCR growth profit decreased 3.1 million, or 27.7%. Due to lower revenue with our focus on smaller and higher quality projects with better margins. This enables GCR growth margin to expand to 20.6% from 17.1% in Q2 2023.

Speaker Change: OER gross profit comprised 75.7% of total gross profit dollars, or $25.4 million.

Speaker Change: ODR gross profit increased $8.1 million or 47.1%, driven by higher revenue, with expanded gross margin in Q2 to 30.6% vs. 29.3% in Q2 of 2023.

Jamie Brooks: As a result, total growth margin for the second quarter was a record of 27.4%. As Mike mentioned, up from 22.8% in the prior year. During the quarter, SG&A expense increased approximately 2.8 million to 23.2 million from 20.4 million in Q2 2023. As a percentage of revenue, SG&A expense was 19%, up from 16.3% in 2023. Approximately 1.5 million of the 2.8 million increase was primarily due to our two recent acquisitions that were not part of our company in Q2 2023. The remainder of the increase was driven by payroll, stock-based compensation, and tribal entertainment expenses. For 2024, we are still targeting SG&A expense as a percentage of total revenue of around 18% to 19%.

Jayme Brooks: As a result, total gross margins for the second quarter were a record 27.4%, as Mike mentioned, up from 22.8% in the prior year. Additionally, approximately $1.5 million of the $2.8 million increase was primarily due to our two recent acquisitions that were not part of our company in Q2 2023. The remainder of the increase was driven by payroll, stock-based compensation, and travel and entertainment expenses. For 2024, we are still targeting SG&A expense as a percentage of total revenue of around 18 to 19% as we continue to invest in our ODR business to drive growth.

Speaker Change: During the quarter, SG&A expense increased approximately $2.8 million to $23.2 million from $20.4 million in Q2 2023. As a percentage of revenue, SG&A expense was 19% up from 16.3% in 2023.

Jamie Brooks: As we continue to invest in our ODR business to drive growth. Adjusted EBITDA to the second quarter was 13.8 million, up 16% from 11.9 million in Q2 2023. Adjusted EBITDA margin for the second quarter was 11.3%, up 180 basis points from 9.5% in Q2 2023. Net income for the second quarter was 6 million, or 50 cents per diluted share, compared to 5.3 million, or 46 cents per diluted share in 2023. This represents 12.1% growth in net income compared to the second quarter of 2023. Turning to cash flow, we had 16.5 million of cash flow from operating activities during the second quarter compared to 16.9 million in 2023.

Jayme Brooks: Adjusted EBITDA for the second quarter was $13.8 million, up 16% from $11.9 million in Q2 2023. Net income for the second quarter was $6 million or $0.50 per diluted share compared to $5.3 million or $0.46 per diluted share in 2023. This represents 12.1% growth in net income compared to the second quarter of 2023. This difference was primarily driven by the timing of accounts receivable, billings, and collections. Cash Flow from Investing Activities reflects $1.5 million allocated to the purchase of rental equipment during the quarter, which we mentioned earlier and during the first quarter earnings. Free cash flow for the quarter was $10.9 million compared to $8.8 million in Q2 2023, an increase of 23.8%, which we define as cash flow from operations minus changes in working capital and capital expenditures.

Speaker Change: Adjusted EBITDA for the second quarter was $13.8 million, up 16% from $11.9 million in Q2 2023.

Jayme Brooks: This excludes our investment in rental equipment, which was approximately $1.5 million in Q2. The free cash flow conversion of adjusted EBITDA for the second quarter was 78.7% versus 73.7% in the second quarter last year. Now I'll turn the call back to Mike for his closing remarks.

Speaker Change: Net income for the second quarter was $6 million, or $0.50 per diluted share, compared to $5.3 million, or $0.46 per diluted share in 2023.

Speaker Change: This represents 12.1% growth in net income compared to the second quarter of 2023.

Speaker Change: Turning to cash flow, we had $16.5 million of cash flow from operating activities during the second quarter, compared to $16.9 million in 2023.

Jamie Brooks: This difference was primarily driven by the timing of the counts receivable buildings and collections. Cash flow from investing activities reflects 1.5 million allocated to the purchase of rental equipment during the quarter, which we mentioned earlier and during the first quarter earnings. Call. Free cash flow for the quarter was 10.9 million compared to 8.8 million in Q2 2023, an increase of 23.8 percent, which we defined as cash flow from operations minus changes in working capital and capital expenditures. This excludes our investment in rental equipment, which was approximately 1.5 million in Q2. The free cash flow conversion of adjusted EBITDA to the second quarter was 78.7 percent versus 73.7 percent in the second quarter last year.

Speaker Change: This difference was primarily driven by the timing of accounts receivable, billings, and collections.

Speaker Change: This excludes our investment in rental equipment, which was approximately $1.5 million in Q2. The free cash flow conversion of adjusted EBITDA for the second quarter was 78.7% vs. 73.7% in the second quarter last year.

Jamie Brooks: For 2024, we continue to target a free cash flow conversion rate of approximately 70 percent, excluding our investment in rental equipment, which is approximately 4 million dollars. We continue to expect capital expenditures for 2024, excluding the investment in the rental equipment, to be approximately 3 million dollars due to the acceleration of our OGR strategy. Turning to our balance sheets at the end of Q2, we had 59.5 million in cash and cash equivalents, and 10 million borrowed on our 50 million dollar revolving credit facility at a weighted average interest rate of 5.72 percent. For the quarter, interest income exceeded interest expense.

Speaker Change: For 2024, we continue to target a free cash flow conversion rate of approximately 70%, excluding our investment in rental equipment, which is approximately $4 million.

Jamie Brooks: Our balance sheet remains strong, and we are well positioned to make necessary investments to drive our continued ODR expansion and to make strategic acquisition.

Speaker Change: Our balance sheet remains strong and we are well positioned to make necessary investments to drive our continued ODR expansion and to make strategic acquisitions.

Michael McCann: Now let us turn the call back to Mike for closing remarks. Thank you, Jamie. We believe Lumbach is well positioned for sustained profitability, continued growth, and stability to economic cycles.

Michael McCann: Thank you, Jayme. We believe Limbach is well-positioned for sustained profitability, continued growth, and stability through the economic cycle. But I think the genuinely exciting part of our story is there's still much more to be achieved in our business transformation. There is more to come as we move towards the optimal business mix between ODR and GCR, add additional service offerings, and grow or acquire businesses. The potential I see is extremely encouraging.

Speaker Change: Now I'll turn the call back to Mike for closing remarks.

Mike: Thank you, Jayme. We believe Limbach is well-positioned for sustained profitability, continued growth, and stability through economic cycles. But I think the genuinely exciting part of our story is there's still much more to be achieved in our business transformation.

Michael McCann: But I think the genuinely exciting part of our story is there's still much more to be achieved in our business transformation. There is more to come as we move towards the optimal business mix between ODR and GCR. Add additional service offerings and growth or acquisitions. The potential I see is extremely encouraging.

Mike: There is more to come as we move towards the optimal business mix between ODR and GCR.

Mike: Add additional service offerings and growth or acquisitions. The potential I see is extremely encouraging.

Michael McCann: As we continue to pick up the pace on transition to business, we're increasing our total revenue and adjusted EBITDA guidance ranges for the full year 2024. Adjusted EBITDA for the full year is now expected to be in the range of 55 million to 58 million, which is up from our previous guidance of 51 million to 55 million that we presented in Q1. In our expected full year total revenue guidance range is now 559 to 535 million, up from 510 million to 530 million, which is our previous range. We're maintaining our annual goal of 65% to 70% ODR revenue as a percentage of total revenue.

Michael McCann: As we continue to pick up the pace on transitioning to business, we're increasing our total revenue and adjusted EBITDA guidance ranges for the full year 2024. Adjusted EBITDA for the full year is now expected to be in the range of $55 million to $58 million, which is up from our previous guidance of $51 million to $55 million that we presented in Q1. And our expected full year total revenue guidance range is now $515 million to $535 million, up from $510 million to $530 million, which was our previous range. We're maintaining our annual goal of 65% to 70% OER revenue as a percentage of total revenue. That concludes our prepared remarks. I'll now ask the operator to begin the Q&A.

Mike: As we continue to pick up the pace on transition to business, we are increasing our total revenue and adjusted EBITDA guidance ranges for the full year 2024.

Mike: Adjusted EBITDA for the full year is now expected to be in the range of $55 million to $58 million.

Mike: which is up from our previous guidance of $51 million to $55 million that we presented in Q1.

Mike: And our expected full-year total revenue guidance range is now $515 million to $535 million, up from $510 million to $530 million, which is our previous range. We're maintaining our annual goal of 65% to 70% ODR revenue as a percentage of total revenue.

Operator: That concludes our prepared remarks. I'll now ask the operator to begin the Q&A.

Speaker Change: That concludes our prepared remarks. I'll now ask the operator to begin the Q&A.

Operator: Thank you. The floor is now open for questions. If you do have a question, you may press star 1 on your telephone keypad at this time. If your question has been answered, you can remove yourself from the queue by pressing 1. Again, ladies and gentlemen, it's Star 1.

Speaker Change: Thank you. The floor is now open for questions. If you do have a question, you may press star 1 on your telephone keypad at this time. If your question has been answered, you can remove yourself from the queue by pressing 1. Again, ladies and gentlemen, it's star 1. And our first question comes from Rob Brown from Lake Street Capital. Go ahead, Rob.

Rob Brown: And our first question comes from Rob Brown from Lake Street Capital. Go ahead, Rob. Good morning, congratulations on a good corner. The first question is on sort of the strength areas you're seeing in terms of verticals that you're in. I know there's the shift going on, but where are you seeing kind of market strength and demand as you play your strategy? Sure, Rob.

Rob Brown: Good morning and congratulations on a good quarter.

Speaker Change: Morning, Rob.

Rob Brown: The first question is on sort of the strength areas you're seeing in terms of verticals that you're in. I know there's the shift going on, but where are you seeing kind of market strength and demand as you plot your strategy?

Michael McCann: When I think about our verticals, I always think about the nature of the customers and their vision critical. They can't afford downtime. And I think that's really helped us. So just to kind of go through them at a high level, health care, every one of our locations is that's a vertical market that they're super focused on. So we like that. The ability to be relatively stable. The other thing I think we're seeing within health care is tremendous deferred maintenance. That deferred maintenance has probably gone on for three or four years. We're talking to a lot of our customers about the fact that they need to continue to reinvest in their building.

Rob Brown: You know, when I think about our verticals.

Speaker Change: I always think about the nature of the customers and they're mission-critical. They can't afford downtime and I think that's really helped us. So, just to kind of go through them at a high level. Healthcare.

Speaker Change: The ability to be relatively stable. The other thing I think we're seeing within health care is tremendous deferred maintenance. That deferred maintenance has probably gone on for three or four years.

Speaker Change: We're talking to a lot of our customers about the fact that they need to continue to reinvest in their buildings, so it's going to produce future capital projects. And I think our ability to deploy on-site account managers

Michael McCann: So that's going to produce future capital projects. And I think our ability to deploy on-site account managers is going to allow us to really get to know their building and be well positioned from a capital project in the next couple of years. Delta Remain Faction continues to be strong in the middle of the country for us. Continuing reinvestment at facilities, upgrades, different lines that are being added so that could be strong. Data centers, as I mentioned earlier, not necessarily in every one of our locations, but there's some strength that we're seeing from existing infrastructure upgrades from that standpoint.

Michael McCann: And last I would say in the higher ed life science type market, the customers that we have that have those mission critical labs that can't afford downtime, they continue to be good, durable spenders. So, in conclusion, the verticals definitely having that mission critical can't afford downtime.

Speaker Change: The vertical is definitely having that mission-critical, can't-afford-downtime, again, I think really helps us and should help us in the future.

Michael McCann: Again, I think really helps us and should help us in the future.

Rob Brown: Thank you. And then, in terms of your kind of EBITDA margin expansion, has been very strong.

Operator: Okay, thank you. Thank you. Rob, when you think about

Michael McCann: What's sort of the goal that you think this can get to in terms of EBITDA margin as the, as this makeshift fully takes hold? Rob, when you think about our strategy, I was, and I mentioned this, I have a two before. So you think about it in terms of our three different pillars. The first pillar is obviously shifting from a primarily GCR to primary owner drag. And we're well on the way for that. And that's going to be able to obviously produce some lift. And that's what's really helped us the last couple of years. The second leg of the stool is really our ability to evolve, evolve offering to produce a lot higher margin.

Michael McCann: Rob, when you think about our strategy, I was, and I mentioned this obviously before too, you think about it in terms of our three different pillars. The first pillar is obviously shifting from primarily GCR to primary owner direct, and we're well on the way to that, and that's going to be able to obviously produce some lift, and that's what's really helped us the last couple years. The second leg of the stool is really our ability to evolve our offering to produce a lot higher margins. So that's going to produce another benefit from that perspective.

Speaker Change: primarily GCR to primary owner direct and we're well on the way for that and that's going to be able to obviously produce some lift and that's what's really helped us the last couple years. The second leg of the stool is really our ability to evolve

Michael McCann: So that's going to produce another ability from a, from a gain from that perspective. And then you think about the third piece of it from an acquisition perspective. That's going to help us enhance offerings that we're looking to introduce, as well as scale, footprint, and eventually leverage over a period of time. So we think there's lots of room to go. And I think about the, we're rad even from our first pillar, getting through that first pillar. We're all on our way from that, but I think there's a lot more to become, come down the line as well, too.

Speaker Change: Michael McCann, Julie Kegley, Jeremy Hellman

Michael McCann: And then you think about the third piece of it from an acquisition perspective. That's going to help us enhance offerings that we're looking to introduce, as well as scale, footprint, and eventually leverage over a period of time. So we think there's lots of room to go. And I think about where we are at, even from our first pillar, getting through that first pillar; we're all on our way from that. But I think there's a lot more to come down the line as well, too.

Speaker Change: as well as scale, footprint, and eventually leverage over a period of time. So, we think there's lots of room to go, and I think about where we're at even from our first pillar. Getting through that first pillar, we're all on our way from that, but I think there's a lot more to come down the line as well, too.

Rob Brown: Okay.

Michael McCann: Okay, thank you. And then the last question is really on the rental fleet that's expanded nicely. How much sort of investment do you foresee?

Rob Brown: Thank you.

Michael McCann: And then last question's really on the rental fleet. That's expanded nicely. How much, how much sort of investment to you to foresee doing there and what can that business become? Yeah, so I think we've seen, there's a couple of things with the rental. Obviously, we invested this year, $4 million in rental equipment. And it's really nice to see this summer that this equipment is really starting to move. One thing I think from, so I think obviously it's working that we're going to be thinking about. Obviously, we're going to take a hard look and think about that going forward as well, too.

Speaker Change: Okay, thank you. And then last question is really on the rental fleet. That's expanded nicely. How much sort of investment do you foresee doing there and what can that business become?

Michael McCann: That would be a good business position. But one thing I wanted to point out in one of the examples that we gave. When I think about rentals and we think about rentals, it's just another piece that we can bundle into an overall solution. We have an industrial client that they were looking for upgrades and that sometimes the clients will take some times to make decisions; meanwhile, they have a need in their facilities that that's where the rental fleet becomes in perfectly can really provide that end to end solution. Here's a rental equipment, cool equipment; you need to keep going.

Michael McCann: When I think about rental, and we think about rental, it's just another piece that we can bundle into an overall solution. We have an industrial client that was looking for upgrades, and sometimes clients will take some time to make decisions; meanwhile, they have a need, and their facility is down. That's where the rental fleet comes in perfectly. We can really provide that end-to-end solution. Here's the rental equipment, the cool equipment you need to keep going.

Michael McCann: That allows you and gives you a little bit of time to make a decision. And it just makes a lot of sense while we're providing the rental equipment for us to get the infrastructure upgrade as well, too. So we're going to wait and see how it goes this summer, but we're really very, very excited about our deployment so far. And again, building these rental fleet into an overall bundle solution is obviously something that we're looking forward to in the future.

Michael McCann: That allows you and gives you a little bit of time to make a decision. And it just makes a lot of sense while we're providing the rental equipment for us to get the infrastructure upgrade as well, too. So we're going to wait and see how it goes this summer, but we're really very, very excited about our deployment so far. And again, building these rental fleets into an overall bundled solution is obviously something we're looking forward to in the future.

Speaker Change: And it just makes a lot of sense while we're providing the rental equipment for us to get the infrastructure upgrade as well, too. So we're going to wait and see how it goes this summer, but we're really very excited about our deployment so far.

Speaker Change: And, again, building these rental fleet into an overall bundled solution is obviously something we're looking forward to in the future.

Rob Brown: All right, thank you.

Operator: I'll turn it over. Again, ladies and gentlemen, it's door one to ask a question.

Speaker Change: All right, thank you. I'll turn it over.

Operator: Again, ladies and gentlemen, it's Dara Wan to ask a question. And at this time, I see no further questions. I'd like to turn it back to Mike for any closing remarks. Thank you, everybody, for joining the call today and for your interest in Limbach. If you have any additional questions, please reach out to Julie Kegley at Financial Profiles. Thank you, everyone. Have a great day.

Operator: At this time, I see no further questions.

Michael McCann: I'd like to turn it back to Mike for any closing remarks. Thank you, everybody, for joining the call today and your interest in Limbock.

Speaker Change: At this time, I see no further questions. I'd like to turn it back to Mike for any closing remarks.

Michael McCann: If you have any additional questions, please reach out to Julie Kegley at Financial Profiles. Thank you, everyone.

Mike: Thank you, everybody, for joining the call today and your interest in Limbach. If you have any additional questions, please reach out to Julie Kegley at Financial Profiles. Thank you, everyone. Have a great day.

Operator: I'm a great day.

Mike: [inaudible]

Operator: Thank you; this does conclude today's conference. We thank you for your participation.

Operator: Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

Operator: You may disconnect your lines at this time and have a wonderful day. Thank you.