Q2 2025 Limbach Holdings Inc Earnings Call
Good morning and welcome to the second quarter 2025 limbach Holdings. Inc, earnings conference. Call and webcast all participants will be in the listen. Only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero.
I will now turn the conference over to your host. Lisa Fortuna of financial profiles. You may begin
Good morning, and thank you for joining us today to discuss limbach Holdings Financial results for the second quarter of 2025.
Yesterday, limbach reissued, its earnings release and filed, its form, 10 Q for the period ended. June 30th 2025
Both documents as well as an updated. Investor presentation are available on the investor relations section of the company company's website at www.limbsaver.com
management. May refer to select slides during today's call and encourages investors to review the presentation it in its entirety.
On today's call are Michael McCann, president and chief executive officer and Jamie Brooks Executive, Vice, President and Chief Financial Officer.
Before we begin, I would like to remind you that today's comments will inform 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 or and phrases.
Statements that are not historical facts. Such as those about expected financial performance 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 in the company's results compared to these. Forward-looking statements is contained in limbo's SEC, filings including reports on form, 10K and 10 Q.
Please note that on today's call, we will be referring to non-gaap measures. You can find the reconciliation of these non-gaap measures to the most directly comparable, gaap measures in our core, second quarter 2025 earnings release. And in our investor presentation, both of which can be found on lindox Industrial relations website and have been furnished in the Form, 8K filed with the SEC.
With that, I will now turn the call over to President and CEO Michael McCann.
Good morning and welcome everyone. Thank you for joining us today.
Limbach plays a critical role in ensuring the reliability of mission critical infrastructure within our customers buildings and Facilities.
Our expertise lies in optimizing and sustaining the performance of existing systems, so they function flawlessly, especially when the stakes are high.
as we've consistently noted before our growth and expansion strategies anchored by 3 key initiatives,
Number 1, scaling our odr business or organically as we become a trusted partner to our customers.
Number 2, driving profitability through enhanced product and service offerings.
And number 3, making strategic Acquisitions that expand our Market presence and brand.
Since we started our shift from GCR odor, odor Revenue as a percentage of total revenue as a increase from 21%, in the second quarter of 2019 to 76.6% in the second quarter of 2025.
For the first half of 2025 odr represented, 72.4% of total revenue which is in line with our 2025 guidance of between 70% and 80%.
This strategy is driving margin expansion and earnings growth while also enhancing our risk profile.
Over the past year we've been we begin.
To implement this land and expand strategy, which we believe will fuel inbox next phase of growth.
as a result of organic growth and strategic Acquisitions over the past several years, we now have 21 locations in customers and 17 Metropolitan service areas or msas
This includes several National customers with multiple locations across different states and complex maintenance needs given the mission critical nature of their businesses.
Our results continue to reflect the meaningful progress we've made in this transformation compared to the year-ago period.
Second quarter 2025 total revenue grew 16.4%.
Odr Revenue, Rose 31.7%, gross profit increased by 18.9% and adjusted evida growth 30%.
Damage we will go into more details on the financial shortly but we're pleased with a strong consistent momentum. We've achieved over the past 6 years.
Returning to the broader environment. We continue to navigate ongoing macroeconomic uncertainty with the performance of varying across and markets. Operate, operating primarily across 6, distinct verticals provides diversification. It helps us mitigate volatility.
And reduces Reliance on any single industry.
Next, I'd like to provide a quick update of what we are currently seeing in some of the key verticals. We serve
In healthcare deferred maintenance is driving quick or emergency repair replacement work. We are starting to have proactive discussions with customers to avoid emergencies.
The goal is that even if some customers are reluctant to spend immediate dollars on short-term capital projects, we are helping them plan their spending for future years. This gives us visibility into their future requirements.
For industrial manufacturing. Customers, we are performing upgrades to existing manufacturing lines and providing labor for industrial shutdowns.
These shutdowns are being performed as planned and customers continue to to invest in their facilities.
And a life science and higher education. We primarily support our customers by maintaining essential systems, upgrading critical infrastructure and minimizing downtime, especially in Mission critical environments and higher education. We are currently seeing the majority of our revenue and laboratory building environments.
To support the ongoing expansion of OD, our business. We've scaled our sales organization over the last year. Over the addition of 40 new salespeople.
Consists of on-site account. Managers, this marks a pivotal evolution in our go to market strategy and how we engage with customers, emphasizing a deeper understanding of the facilities and anticipating their operational needs.
To support our expanding sales team. We recently hired Amy Dorset as senior Vice President of Sales, Amy brings over 20 years of experience as a strategic results, driven sales leader with expertise in business development and client relationship management.
She has a proven track record of expanding business, portfolios, and strengthening existing relationships to drive sustainable growth.
For prior roles include sales leader positions for major oems, including Honeywell Crane and Johnson Controls while consistently delivering high impact results.
We're excited to welcome Amy to the limbo team.
This type of expertise will be instrumental in advancing. Our national account capture strategy and enhancing the capabilities of our existing sales staff, particularly in developing Capital, plans with building owners and driving, proactive, sales and training.
Our sales efforts are intentionally. Constructed on an existing customers that have complex high demand facilities, that require ongoing system, enhancements and continuous upkeep.
We believe our current footprint represents, just a fraction of the total opportunity Within These environments.
Importantly, our growth is independent on new construction. It's driven by the reoccurring needs of long-standing customers.
These relationships offer the greatest potential for organic growth.
In our account teams are committed to strengthening them further through reliable service, proactive engagement and high impact Solutions.
1 of our major initiatives for 2025 is strategically expanding from a reactive support model to a proactive partnership approach.
Our goal is to play a more strategic role in shaping customer budgets ahead of the next planning cycle to turn Opex, spend or small quick hitting or emergency projects into proactive Capital programs.
We believe this Evolution will not only deepen our customer relationships but also enhance visibility and predictability to our sales pipeline transitioning. From an Opex type spend to a capital program isn't an immediate
and could take typically 6 to 12 months.
It could require a facility assessment, energy benchmarking, and/or asset spend analysis.
Additionally, these Capital programs are typically sold to the C Suite or VP level within an organization.
as part of an overall budget budget as opposed to Opex, spend, which is sold at the facility manager level based on existing budgets,
Our approach is to have a local and a national account exec working with the on-site account, managers to develop the program.
Deliver this financial sale to the customer.
With Amy's executive presence and sales expertise. We are confident in our ability to help coach our sales team to turn a technical sale into a financial sales.
As an example, we were recently hired by national Healthcare owner to perform energy and facility assessments for over 20 different properties.
Our sales team will conduct the assessments and then present Capital project solutions that help. Build this customer's long-term spending program. Projects won't be immediate but this important work should set up for several years of spend. That will be more predictable than Opex reactive spend.
The second element of our growth strategy focuses on a broadening. Our service portfolio. Deposition limbach is a 1-stop shop for building owners, the capture Rising, customer demands and tap into higher margin opportunities.
Last quarter, we invested approximately 2 million to expand our climate control, rental Fleet positioning ourselves to meet seasonal demand, as temperatures climb.
This initiative represents a growth opportunity and highlights our commitment to evolving Beyond conventional service lines.
We continue to make investments to drive, odr, Revenue growth.
And increase our value to these customers.
Offering such as digital solutions, that manage and monitor the performance of Building Systems, including data analytics, energy, consumption, and sustainability we'll allow us to develop new revenue streams.
Leverage, our professional service capabilities to support multi-location, Regional and National customers, and core and markets in Drive energy, retrofit and performance, optimization for building owners.
In the third part of our M&A strategies, we remained active in July. We completed our largest acquisition to date with the addition of Pioneer Power.
As a reminder, Pioneer provides industrial and institutional mechanical solutions to the healthcare sector.
Food power, utility, and oil refining. And other verticals in the Greater Twin Cities region, and the Upper Midwest.
This transaction directly aligned with our discipline acquisition criteria.
Pioneer brings specialized expertise.
In our core verticals and the majority of their business is already focused on working directly with building owners.
Pioneer experience, or footprint in the core Midwest and extends our reach into a new Geographic Market in the Upper Midwest, bringing our msas to 17
Its technical capabilities and service offerings compliment ours and we see strong cultural compatibility between our teams.
We are excited to welcome Pioneers approximately 300 colleagues to our family.
The integration process is well underway in terms of systems and operational processes and our teams are already working together.
Since going public in 2006, we have completed 6, highly selective Acquisitions each. The result of discipline, diligence and strategic fit analysis.
And of continuously finetuned or integration process with every transaction.
behind those 6 deals or dozens of opportunities that we have deliberately passed on whether to do the evaluation
limited strategic alignment or concerns around cultural fit.
Our proven integration Playbook unfolds in 2, distinct phases, Phase 1.
Focuses on system. Integration driving fixed cost reduction and leveraging a unified organizational structure and common platform.
In addition we apply gross, parfait, benchmarking and Implement robust, risk management, Tools, in an effort to ensure operational, efficiency, and financial discipline.
This is typically a 1 to 2 year, process during phase 2, we established targeted accounts strategies deployed on-site account managers and introduced evolved lead box offerings.
We also complete the full build out of dedicated account teams to deepen, customer engagement, the duration of phase, 2 can take between 2 to 4 years.
Through these ever evolving value, creation actions. Our goal is to enhance Pioneers performance, and eventually bring its margins in line with ours.
Ultimately creating a additional stockholder value by acquiring a scale of business and an attractive multiple. We are prioritizing the successful integration of pioneer while we continue to build and monitor and active m&a pipeline for the future.
Overall, our acquisition is strategies grounded in a thoughtful methodical approach targeting high-quality companies that align with our values and we care culture
that are committed to building long-term relationships with building owners and delivering essential Solutions.
This strategy is yielded meaningful results for us. At the same time, we've worked to build the limbo brand in the market as a trustworthy and principal partner. Our goal is to become the first choice for a distinguished Enterprises. Looking to join a bigger platform with a strong pipeline of opportunities. We expect strategic m&a will continue to play an important role in our growth strategy.
I would now like to turn a guidance where we have revised our 2025 outlook for the full year. We anticipate generating between 650 and 680 million in Revenue with adjusted, Eva projected in the range of 80 to 86 million.
While integration efforts remain on track with Pioneer. This represents the largest acquisition in our history of the public company. We are approaching our initial projections with a conservative measured Outlook.
As we gain greater visibility over the coming months, as we work through Phase 1 of the integration of pioneer, we expect to provide an update on the next quarterly call. Additionally, Revenue adjusted. Even a contributions for the company are not expected to be evenly distributed between the 3rd and the fourth quarter as we anticipate a heavier weighting towards Q4.
In summary we are gaining strong momentum and remain committed to creating long-term value for building owners by fostering enduring relationships.
And becoming indispensable partner in managing their mission critical systems.
once again, by operating at 17 msas and 6 independent Vehicles, make sure there's no single Market defines our trajectory
This structure enables us to absorb location or sector specific fluctuations while sustaining consistent performance across Cycles.
For the balance of 2025. Our key priorities are 3-fold. First drive, Topline Revenue growth. Second expand relationships to evolve Solutions, which requires training up the sales force to evolve a technical sale into a financial sale. And number 3, continue the execution of phase 1 of the pioneer integration.
And building our acquisition pipeline. Now, I'll turn over to Jamie to walk through the financials.
Thank you, Mike. Our form, 10 q and earnings, press release filed yesterday, provide comprehensive details of our finance results. So I will focus on the highlights of the second quarter.
all comparisons are second quarter 2025 versus second quarter 2024, unless otherwise noted
In the second quarter, we generated total revenue of 142.2 million compared to 122.2 million in 2024.
Total revenue growth was 16.4% while odr Revenue. Grew 31.7% to a quarterly record of 108.9 million and GCR Revenue declined. 15.7%
your Revenue decline is intentional as we execute our mix of strategy, towards odr,
Odr Revenue, accounted for 76.6% of total revenue for the second quarter up from 67.7% in Q2 2024.
Total gross profit for the quarter. Increased 18.9% from 33.5 million to 39.8 million reflecting the ongoing growth of our odr segments.
Total growth margin on a Consolidated basis. For the quarter, was 28%, up from 27.4% in 2024, driven by the combination of higher margin. Odr, revenue and higher quality GCR projects.
Odor growth profit comprised 79.3% of the total growth profit dollars or a quarterly record of 31.6 million.
Odr growth profit, increased 6.2 million or 24.6% driven by higher Revenue, despite lower odr segment, margins of 29%, compared to 30.6% resulting from certain odor, related project write-ups recognized in the period last year. They did not recur in the current period.
DCR gross profit increased 0.1 million or 1.1% due to higher margins of 24.7% compared to 20.6% driven by our focus on higher quality projects despite lower Revenue.
Sg&a expense for the second quarter was 26.6 million and increase of approximately 3.5 million from 23.2 million. This increase includes the addition of the 40 new salespeople, Mike mentioned earlier and sgna associated with Kent Island and Consolidated, mechanical that were not part of the company during the second quarter of 2024.
As a percentage of Revenue sgna expense, was 18.7% down from 19% in the same period last year.
We continue to currently expect sgna for 2025 to be in the target range of 18 to 19% of Revenue. Due to our ongoing investment in growing the odor business.
Adjusted. Even after the quarter was 17.9 million up, 30% from 13.8 million in Q2 2024.
Adjusted, evida margin was 12.6%. Compared to 11.3% in Q2 last year.
Net income for the quarter, increased 30.2% from 6 million to 7.8 million and earnings per diluted, share grew 28% from 50 cents to 64 cents.
Adjusted net income grew 29% from 8.7 million to 11.3 million and adjusted earnings per diluted. Share, Grew 27.4% From 73 cents to 93 cents.
Turning to cash flow are operating cash inflow. During the second quarter was 2 million compared to 16.5 million during the second quarter last year. Primarily due to the timing of Billings that impacted changes in working capital.
Free cash flows are defined as cash flow from operating activities, less changes in working capital and capital expenditures.
Excluding our investment in additional rental. Equipment was 16.1 million in the second quarter compared to 10.9 million in Q2 last year, representing a 5.2 million increase.
The free cash flow conversion of adjusted Eva for the quarter was 89.7% versus 78.7%.
For full year, 25, we currently continue to Target a free cash flow. Conversion rate of at least 75% and expect capex to have a run rate of approximately dollars primarily due to the acceleration of our odr strategy.
This amount excludes an additional investment of 3.5 million in the rental equipment for 2025, but which 2.1 million occurred in the first half of the year.
Turning to our balance sheet. As of June 30th, we had 38.9 million in cash and cash, equivalents and total debt of 33.2 million, which includes 10 million borrowed on our revolving credit facility and a head trait of 5.37%.
At the end of June, we expanded our revolving credit facility from 50 million to 100 million and utilized our expanded credit facility as part of the pioneer acquisition on July 1st.
With the expanded facility and our expected cash generation from the business. We believe our balance sheet remains strong, and we believe we are, well, positioned to support our company to organic growth initiatives and strategic m&a transactions.
I'll now ask the operators to begin Q&A.
Thank you.
Ladies and gentlemen, we will now be conducting a question and answer session.
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Ladies and gentlemen, we will wait for a moment while we Poll for questions.
Our first question comes from Chris Moore with CJs Securities. Please go ahead.
Hey, good morning guys. Thanks for taking a couple. Yeah maybe we can start with with gross margins. So um specifically on the GCR side I think 24.7% last 2 quarters. You know, I was modeling a pretty good.
You know, the decline moving forward, and I just, I know you're got higher quality projects.
I just wonder how how we should be thinking about them, you know, this year and next year um, you know, kind of ultimately what what's a normalized level there?
Yeah, just from a from a high level perspective. Um we've been really focused like you said on the quality to make sure that whatever work that gets sold from a DCR perspective. Those opportunities are vetted. They make sense with 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 Jimmy do you want to touch upon long term? Yeah, I mean, yeah, if you look back over the, you know, the past year it'll EB and Flow by each quarter. Um, so from a, you know, a long-term perspective, we really only Guide to the total to the total revenue as it goes profit line of being that 28 to 29% for 2025. Um, and so, you know, you'll just see it as low based on how the projects burn in each quarter.
Got it, and I appreciate that. Maybe staying with that theme for a second: Pioneer, now being in the mix, is it fair to say that...
I don't, I don't think you've broken out the odor versus GCR. I think they're they're both significant the the the gross margins. Um, contribution from from Pioneer, at least for the next few quarters would be diluted to gross margins overall.
Yes, the Pioneer definitely. Um, that's how we do our value creation is adding, you know, going in and being able to increase those gross margins. So yes, compared to where we're at. You could expect that um, in the in the you know short term as we're going through our integration process and um then rolling out our strategy.
Hey, Chris. I think you know, we're really, you know, obviously we we're in our first a little bit more than 30 days. At this point, we're really focused on that Phase 1 integration piece which goes into getting our systems in place. Gross profit benchmarking um getting everybody on that first standard platform as well too. We're taking we're taking a real measure of approach to from from that perspective and applying all of our lessons learned as well too. So you know every time we do a deal um we continue to tweak and learn from them and think about from that value of creation process and um that's definitely the stage that we're at with Pioneer right now.
Perfect and maybe I'll sneak just 1. Last 1 more more, big picture. Mike. You walked through the verticals. Obviously, Healthcare key driver industrial manufacturing. You know. I think Pioneer brings much there.
Is there 1 vertical? You know, that has a chance to become much more important? Beyond those 2, O over the next 2 to 3 years.
Yeah. I mean, we
I think that's really going to be across, you know, all 6 verticals but those 3 that I mentioned in the prepared marks are really our Focus.
Got it, I appreciate it. I'll jump back in line.
Thanks Chris.
Thank you.
Our next question comes from Rob Brown with Lake Street Capital. Please go ahead.
Hi, good morning.
Just wanted to get your uh your kind of sense on the demand environment. Um, how it's how it's trending and and sort of where you're seeing some of the strengths in the in the business.
Yeah. So
Just to kind of look back from a vertical Market perspective, you know, our model. And, um, I think we've learned this more and more is really about, uh, employing proactive sales, there's, you know, we're working with customers that have to spend money. Um, they have to prepare getting them to think not just reactive but proactive, I think that's 1 thing that we are really super focused. So you think about it from a healthcare perspective, they have to make the repair
But um, 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, uh, that we gave them prepared. Remarks was, we had a national Healthcare customer that, um, we're doing assessments on 20, you know, about 20 locations. And um, this is when I think the combination of from a local relationship turns into a national relation,
Relationship and really expanse from a capital program, that's 20 different locations.
Um, across our footprint and nationally that allows us to have access to the Future. So, so much of our uh, strategy, real 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 uh, to really capitalize that and to have a sustainable uh long-term Revenue um Source from these customers.
Okay great. Thank you. Uh and then and then on the GCR uh kind of declines. I know that's been part of your strategy but um you know going forward how do you continue to see that that business declining or or does that level off at some point and really maintain at this? Um, this level
You know, this year, we're, we're getting to our 70 to 80% odr. Which obviously is 20 to 30% GCR. So um we're really pushing the business to go to the higher margin Owner, Direct business. Um, you know,
Like anything, a lot of our locations, they're all in a different Journey as we bring in Acquisitions, they may have a component of GCR as well too. So um our goal is always to push towards Owner Direct but depending on uh future Acquisitions. Um, stage of the business that will kind of EB and flow a little bit, but the focus has not changed and will not change from to push towards Owner Direct
Okay, great. Thank you. I'll turn it over.
Thank you. Our next question comes from Brian Brophy. Please go ahead.
Yeah, thanks. Good morning, everybody. Um, 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? Thanks.
Yeah, so from the guy's perspective um a lot of this has to do from a Pioneer Power. You know, it's our largest acquisition is a public company so we want to make sure the initial projections are conservative and from a measured perspective and I think as we go from kind of continue from a phase 1 perspective um and kind of the steps that I talked about before, we're going to kind of take a look at that. Um, as we go forward.
Okay.
Um and then I guess on the odr backlog it's all 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? Thanks
Yeah, no I I think it's really timing based. You know I think we have you know the backlog is a component of it. It's not the only component because we could end up uh burning work. It could be time of material work that goes very quickly through. Um
Jayme Dorset. So I think our, um, our ability to translate epics into capex. This higher has been been a long-term 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 her expertise, from various, oems companies, and, 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. You know, as we go to 26 and 27, looking ahead from a sales perspective,
Okay, and you you touched on some of this already. Um, but in regards to some of the sales, folks, you've hired over the past couple of quarters particularly the on-site account managers.
Just curious how that ramp up is going relative to expectations in terms of their contribution.
yeah, I I think
anytime we bring somebody on there's there's always a ramp up time um and occasionally, we'll be in a situation where we'll have somebody in there like perfectly lines up where they're an account, it's ready to go. I think as we learned going forward, we hope that that ramp up time shortens um from from what we've seen, you know, I think relatively from an expectation perspective, you know the higher that we make to kind of get those true contributions. It takes a decent amount of time so it's almost like you're making hires for really full year full year contributions for the following year. So we've done that the last 3 years.
Um it made a real big investment from a sales perspective. So you know, as those accounts mature as those stealth people mature and their experience level at the company that's going to lead to um a better return. And I think also it'll help us from a ramp up period but generally they performed where we thought they were going to perform.
Very helpful. I'll pass it on. Thank you.
Thanks.
Thank you.
Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mike McCann for closing comments.
Thank you for listening today and for your continued interest in limbach.
We look forward to connecting with many of you soon. Coming again up in September, we are attending the Lake Street, Big 9 Conference in New York and the da Davidson Diversified Industrials and service conference in Nashville. Have a great rest of your day.
Thank you, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.