Q3 2025 Limbach Holdings Inc Earnings Call

Speaker #3: Good morning and welcome to the Limbach Holdings, Inc. . Third quarter 2020 Earnings Conference Call . All participants are in a listen only mode .

Speaker #3: Should you need assistance , please signal a conference specialist by pressing the star key , followed by zero . I'll now turn the conference over to your host , Lisa Fortuna a financial profiles .

Speaker #3: You may proceed .

Speaker #4: Good morning , and thank you for joining us today to discuss Limbach Holdings, Inc. financial results for the third quarter of 2025 . Yesterday , Limbach issued its earnings release and filed its form 10-q for the period ended September 30th , 2025 .

Speaker #4: Both documents , as well as an updated investor presentation , are available on the Investor Relations section of the company's website at Limbach Inc.com .

Speaker #4: Management may refer to . Select slides during today's call and encourages investors to review the presentation in its entirety . On today's call are Michael McCann president and chief Executive officer and Jayme Brooks executive vice president and chief financial officer .

Speaker #4: We will begin with prepared remarks and then open the call to questions . Before we begin , I would like to remind you that today's comments will include forward looking statements under federal securities laws .

Speaker #4: Forward looking statements are identified by words such as will be , intend , believe , expect , anticipate or other comparable words and phrases .

Speaker #4: 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 .

Speaker #4: 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 SEC filings , including reports on form 10-K and 10-q .

Speaker #4: 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 third quarter 2020 earnings release , and in our investor presentation .

Speaker #4: Both of which can be found on Investor Relations website and have been furnished in the form 8-K filed with the SEC . With that , I'll now turn the call over to president and CEO Mike McCann .

Speaker #5: Good morning . Welcome , everyone . Thank you for joining us today at Limbach . We play a critical role as an enterprise provider of building systems solutions , ensuring the reliability and continuity of mission critical infrastructure across our customers facilities .

Speaker #5: We're focused on industries with long term , durable demand , where facility assets simply cannot fail . We believe our distinct capabilities position us to deliver sustained growth and attractive risk adjusted returns .

Speaker #5: As a reminder , our growth strategy is underpinned by three core pillars . The first pillar is scaling . Our owner direct relationships or business .

Speaker #5: Here we're focused on working in partnership with owners of Mission critical facilities and existing building environments . This work consists mostly of routine maintenance , emergency repairs , small capital projects , and larger retrofit and renovation projects .

Speaker #5: Some of this work is contractual and some is predictable given the age and complexity of mechanical systems . The second pillar is enhancing profitability , increasing wallet share through the introduction of expanded product and service offerings .

Speaker #5: We have strong and growing relationships with our owner , direct customers built on daily performance , trust and our vast knowledge of their critical building systems .

Speaker #5: As a result , there is a win win opportunity for us to expand our service offerings to these customers by introducing new capabilities to solve a greater breadth of issues for owners .

Speaker #5: As our capabilities expand over time , we can deliver more value to both the owner and Limbok . Unlike traditional ink firms that rely on reactive bidding and response to a project , we're seeing these facilities .

Speaker #5: Every day providing solutions by working directly with owners , we have a better grasp of risk and value in order to further leverage these relationships .

Speaker #5: We're formalizing a scalable structure by building a proactive sales team that positions Limbach as a bidding system . Solutions provider . The third pillar of strategic M&A aimed at extending the reach of the Limbach brand , strengthening our market presence and expanding our capabilities through targeted acquisitions , we seek to diversify our vertical market exposure and broaden our geographic footprint while adding new products and offerings that align well with our value proposition .

Speaker #5: For the past couple months , we've received a number of questions from investors . We want to better understand our various revenue streams , particularly in the segment .

Speaker #5: So let me walk through the business and break down the sources of our revenue . There are three quick burning revenue streams maintenance contracts , work orders , and timely material or TNM work .

Speaker #5: Maintenance contracts generate predictable , recurring revenues that are usually small in nature , but which have strong margins . Our maintenance contracts run 1 to 3 years in length .

Speaker #5: Prior to renewal , and are built around routine service for specific equipment and customer sites , work orders and TNM work often results from problems identified during scheduled maintenance or from repairs or opportunistic upgrades of system components .

Speaker #5: In some parts of the market , this is referred to as break fix work . Any one individual work order may not be predictable , but in a large , complex facility there's generally an estimated amount of this kind of work in any given year .

Speaker #5: It's usually quick burning and completed in an on demand basis , or as directed basis . It can be priced based on labor rates , material markups that are pre-negotiated with customers , and anticipating anticipation of needing to act fast when the work happens , or as small , fixed price jobs less than ten K , for example , large industrial customers usually schedule seasonable shutdowns when their facility reduces production and output .

Speaker #5: Repairs , maintenance . This provides us the opportunity to execute a high volume of this type of small work in a short period of time .

Speaker #5: Because TNM work is performed in what's essentially a cost plus basis , the risk profile is different than , say , large fixed price project .

Speaker #5: Taken together , all these work streams account for approximately one third of the revenue for year to date , 2025 , irrespective of the specific structure of the revenue .

Speaker #5: When executing this kind of work , most often becomes an extension of the facility . Staff , regardless of the contractual relationship . Fixed price projects than ten K in our segment can range from quick burning work that is booked and executed in the same month or quarter .

Speaker #5: The projects that typically last less than a year . They're usually performed with an existing facilities are typically tied in some way to an existing customer relationship , and often a maintenance and service relationship .

Speaker #5: This means we're operating in an environment where we know the systems , the sites , and the customers . This preexisting knowledge reduces uncertainty and enhances their ability to manage outcomes .

Speaker #5: As a result , the risk profile of these projects is very different than GCR projects . Additionally , the average project size is approximately 245,000 as compared to the average GCR project size of approximately 2.9 million .

Speaker #5: Both of those are year to date 2025 data points . This project work accounts for approximately two thirds of our revenue , so at a high level , our intentional pivot towards order direct relationship has reshaped our revenue mix .

Speaker #5: It become a more diversified and lower risk with more margins . Consistency . We believe this mix should provide a greater resilience for economic cycles and reflects our focus on stability of predictability and long term value creation .

Speaker #5: A consolidated basis revenue is a percentage of total revenue is steadily increased since 2019 , when we began to shift our strategy . Audio represents 76% of total revenue in third quarter of 2025 , and 74 one 74.1% on a year to date basis in line with our targeted goal , between 70 to 80% for the year going forward , forward , the strategy continues to be focused on growth and a reduction in GCR revenue .

Speaker #5: Keeping in mind , businesses we acquire at the time of acquisition typically do not have an evolved strategy as limbic . However , whether we're speaking about an acquired business or a legacy business , this strategy is driving margin expansion and earnings growth over time .

Speaker #5: While we while also we believe reducing our profile starting to backlog the strategic shift from GCR to means that a larger percentage of our revenue is now generated from quick burning , shorter term projects that can be booked and completed within the same quarter .

Speaker #5: And therefore is not captured in backlog at quarter end . As a result , backlog alone is no overall risk longer as predictable .

Speaker #5: A leading indicator of future revenue as it was in 2018 or even 2022 . With a heavy GCR focus , which is typical for any companies .

Speaker #5: Occasionally we will book projects with building owners that spend multiple quarters . This work is captured in the backlog , however , it's a smaller portion of the overall revenue mix and it can experience quarter to quarter fluctuations .

Speaker #5: So today , looking only at backlog , we'll miss a large percentage of our current revenue streams . Earlier described our work order and team revenue streams and highlighted the industrial shutdown work .

Speaker #5: We engage in most of these revenue streams never get captured or included in a quarter quarterly backlog . Number , and they represent a far larger number than they did several years ago .

Speaker #5: Instead of the large , high risk , multi projects that were core element of our legacy business model , we're now focused on building a diversified business with multiple revenue streams .

Speaker #5: And what we think is durable demand . Selective M&A remains a cornerstone of our growth strategy , enabling us to expand our geographic footprint and deepen market share with an existing regions and to expand our product and service offerings .

Speaker #5: Over the last couple of years , our focus has been broadening on footprint in ways that enhance diversity and position us to serve customers .

Speaker #5: Our approach has always been conservative , and we've remained disciplined in selecting what we pursue , even when the M&A market has gotten overheated .

Speaker #5: To date , we've acquired six high quality cash flow generating businesses at fair values and have used risk mitigating structures where possible . We believe the Limbok brand and our unique business model positions us to engage with great companies that over time , we can reposition to align with our owner focused vision .

Speaker #5: After closing our goals to improve margins further by implementing our value creation processes , our main focus in every deal is to expand the quality of gross profit through benchmarking , building a proactive sales team , and leveraging operational standards using the same tools that transformed our business units over the last six years and led to much higher margins , at lower risk .

Speaker #5: We believe we can expect better results . Acquired companies than what we underwrote at the time of the closing of these transactions . The Pioneer power .

Speaker #5: A our most recent acquisition , were actively executing the first phase of our value creation strategy . During diligence , we identified improving Pioneer Power's lower EBITDA and gross margins as a great opportunity for the intermediate term .

Speaker #5: We are now transitioning pioneer power to accounting system and operating systems . Once complete , we can start to focus on improving the quality of gross profit and providing access to other parts of the operating platform .

Speaker #5: We've got a talented team in the Twin Cities . We want to make sure that we've deployed all the tools at our disposal to support them and to allow the business unit to flourish .

Speaker #5: We evaluate a large volume of acquisition opportunities each year and intentionally walk away from the majority of them . Under my leadership , we will never buy a business just to do a deal .

Speaker #5: Our track record reflects disciplined underwriting , strategic fit and a focus on asymmetrical returns . There is a meaningful upside to our company if we're right and limited downside if we're wrong .

Speaker #5: There are times we lose to competitors willing to pay higher multiples , and we're perfectly comfortable with that . Next , I'll provide an overview of the environment and our core vertical markets .

Speaker #5: Healthcare has long been one of our strongest , most strategic end markets across all operating regions . Given the missing mission critical nature of the healthcare facilities , customers can defer repairs briefly , but delays in capital spending rarely extend beyond a single quarter .

Speaker #5: While some customers experience temporary delays during the summer months and funding both operating and capital expenditures , we're now seeing spending patterns normalize as the year progresses .

Speaker #5: Our sales teams have engaged with core customers and emphasize the importance of long term planning and increasingly , we're hearing that cost certainty is more important to our customers than simply achieving the lowest cost .

Speaker #5: This can be achieved by implementing proactive programs, which help avoid reactionary spending and minimize risks to business operations caused by building system downtime.

Speaker #5: On our latest earnings call , we shared that a national healthcare owner engaged us to conduct facility assessments across 20 locations in Q3 .

Speaker #5: This initiative has already translated into $12 million in capital projects at foresight sites . We'll serve as the design builder for these infrastructure projects .

Speaker #5: Three of which are outside our current geographic footprint . For those out of projects , we'll lead budgeting , design and procurement and utilize a network of subcontractor partners where necessary .

Speaker #5: In industrial manufacturing markets . Our customers continue to execute seasonal , seasonal shutdowns , facility upgrades in order to optimize the production of their plants and facilities .

Speaker #5: During the quarter , both Pioneer Power and Consolidated Mechanical benefit from this type of activity , which is a core element of their local business models in the data center market , Limbok remains focused on supporting hyperscale operators through existing building projects and specialized services , primarily in the Columbus , Ohio market .

Speaker #5: In Q3 , we provide a specialty fabrication services to one of our customers , enabling on site contractors to concentrate on their core workloads while we offered supplemental support , that arrangement provided Limbach with what we think is the optimal balance of risk , return and resource allocation .

Speaker #5: While our current footprint and risk profile limits the scale of data work , we see meaningful growth potential through our national sales efforts and future geographic expansion through strategic acquisitions in the life science and higher education market .

Speaker #5: Some of our higher education clients have adopted a cautious approach to spending during ongoing policy uncertainty in Washington , D.C. while the need for our services remains essential to maintaining the mission critical facilities , many temporary pause capital projects .

Speaker #5: Encouragingly , these clients have begun communicating anticipated spending needs for the coming year , and we are proactively aligning the resources and preparation for ramp up .

Speaker #5: One major client has already requested full time technician support beginning in January , the culture and entertainment Protocol we continue to see consistent spending from our key customers , our recent involvement in capital plan discussions provided valuable insight into some clients .

Speaker #5: 2026 budgets , notably , our largest customer in this segment has shared plans for significantly expanding capital and operating budgets next year . They've invited us to review their prospective project lists and provide input on the work we'd like to pursue , allowing us to proactive plan and allocate resources for 2026 .

Speaker #5: Next , I'll provide an update on sales and marketing initiatives . For the past three years , we've made deliberate investments in building our sales team , which has resulted in a higher relative to many of our peers .

Speaker #5: Our training efforts are focused on equipping the team to anticipate owner challenges and craft solutions that are difficult to commoditize . We believe this investment will soon begin to yield measurable results .

Speaker #5: Both by leveraging more effectively and by enhancing the quality and consistency of gross profit . As we head into Q4 , our priority is to deepen sales training to ensure a strong start to 2026 .

Speaker #5: In many cases , we're not competing as local contractors . Instead , we're working directly for owners in a proactive capacity , helping them anticipate issues and plan their budgets accordingly .

Speaker #5: A recent example from Florida illustrates this approach well . Over the past two years , we've supported a $25 billion annual revenue , health care customer with emergency repairs and small capital upgrades during routine inspection of the main cooling feed .

Speaker #5: Our onsite account manager identified signs of deterioration . We conducted non-destructive testing and the piping was on the verge of failure . In response , we developed a proposal that clearly outlined the ROI and presented it to facility manager , who then escalated to the CFO and the Chief Medical Officer in Q3 .

Speaker #5: The project was funded and we were awarded phase one of the repair . This is a prime example of a capital project where we weren't competing for the work .

Speaker #5: Instead , we earned it by identifying the issue early , presenting and compelling data backed justification for the investment . One of our key differentiators is ability to offer professional services , including MVP engineering , facility assessments , program management and commissioning .

Speaker #5: These services are particularly attractive to national customers who can leverage our domain experience , even in markets where we might not have field execution capabilities .

Speaker #5: These services , along with program management , are key driver of margin expansion during the quarter , we had one of our national healthcare customers engage us to analyze a hospital in New Mexico , both from a cost and engineering perspective as they're considering making a substantial investment in the facility .

Speaker #5: This initial research has the potential to become a design build infrastructure project . We find that customers appreciate our ability to provide an engineered solution that we can also build .

Speaker #5: While their professional service resources are dedicated . National healthcare owners . In the future , we're looking to expand these capabilities into our data center and industrial manufacturing vertical markets as we broaden our service services portfolio , which includes the expansion of our professional services and solutions based selling , we see a path to achieving long term gross margins in the 35 to 40% range .

Speaker #5: Driven by two key dynamics . First , our ability to deepen customer relationships by shifting from reactive transactional sales to proactive , consultative solution sales .

Speaker #5: This approach enables us to build long term operating and capital programs that are tailored to solving our customers needs , rather than competing solely on price .

Speaker #5: Second , our ability to bundle offerings create margin layering opportunities . For example , in infrastructure project may include a rental component allowing us to mark up both individual elements and the overall project costs .

Speaker #5: These strategies position us well to deliver sustainable growth at attractive margins . Moving to guidance , we are reaffirming our 2025 guidance of total revenue in the range of 650 to 680 million and adjusted EBITDA of 80 to 86 million .

Speaker #5: Of note , we have made some updates to our underlying assumptions used to model 2025 guidance to better reflect current market conditions , project timing and operational performance trends .

Speaker #5: These updates influence our outlook and are incorporated into the public issued guidance ranges for total revenue and adjusted EBITDA . As I mentioned earlier , we are on track for total revenue to be 70 to 80% of total revenue .

Speaker #5: Total revenue growth is expected to be 40 to 50% , with organic revenue growth of 20 to 25% . Total organic revenue growth is expected in the range of 7 to 10% , from 10% to 15% previously discussed .

Speaker #5: As we originally anticipated , a more positive mix shift towards odder than GCR Pioneer Power's revenue performance this quarter exceeded our initial expectations .

Speaker #5: While Pioneers Power's current margin profile difference from consolidated performance . We're actively integrating pioneer into Luvox platform , and we have a path to implement operational and commercial enhancements that we expect to expand margins over time because of the higher revenue contribution of pioneer total gross margin is expected to be 25.5% to 26.5% , from 28% to 29% .

Speaker #5: Additionally , SG&A as a percentage of total revenue is expected to be between 15 to 17% from 18 to 19% , primarily due to the higher revenue contribution .

Speaker #5: Now I'll turn it over to Jamie to walk through the financials.

Speaker #6: Our form 10-q in earnings press release filed yesterday provide comprehensive details of our financial results . So I will focus on the highlights for the third quarter .

Speaker #6: All comparisons are third quarter 2025 versus third quarter 2024 . Unless otherwise noted , we generated total revenue of $184.6 million , compared to $133.9 million in 2024 .

Speaker #6: Total revenue growth was 37.8% , while revenue grew 52% to 141.4 million . Of the total revenue growth of 52% , 39.8% was from acquisitions and 12.2% was organic revenue increased 5.6% to 43.2 million , of which 25.1% was growth from acquisitions , offset by an organic revenue decrease of 19.5% , which is as designed as we continue our mix shift towards odor .

Speaker #6: Odour revenue accounted for 76.6% of total revenue for the third quarter , up from 69.4% in Q3 2024 . Total gross profit for the quarter increased 23.7% , from 36.1 million to 44.7 million , reflecting the ongoing growth of our odor segment .

Speaker #6: Total gross margin on a consolidated basis for the quarter was 24.2%, down from 27% in 2024, driven by the lower gross margin profile of Pioneer Power revenue.

Speaker #6: Our strategy with acquisitions is focused on improving the acquired company's gross margin to align with our broader operating model over time , gross profit comprised approximately 80% of the total gross profit , dollars , or $35.7 million gross profit increased $6 million , or 20.3% , driven by higher sales volume , partially offset by lower odor segment margins of 25.2% compared to 31.9% in the year ago period .

Speaker #6: The decrease in segment margins was primarily attributable to pioneer Power's lower gross margin profile . DCR gross profit increased 2.5 million , or 39.3% , due to higher margins of 20.8% , compared to 15.8% , driven by our ongoing focus on higher quality projects .

Speaker #6: SG&A expense for the third quarter was 28.3 million , an increase of approximately 19.3% from 23.7 million . This increase includes SG&A associated with Pioneer Power , Kent Island and Consolidated Mechanical Wear .

Speaker #6: Kent Island was part of the company for only one month in the third quarter last year , and pioneer and Consolidated Mechanical were not part of the company during the entire of the third quarter last year .

Speaker #6: As a percentage of revenue , and expense decreased 15.3% as compared to 17.7% , primarily due to the increased revenue in the third quarter of 2025 provided by Pioneer Power .

Speaker #6: Adjusted EBITDA for the quarter was 21.8 million , up 25.6% from 17.3 million in Q3 24 . Adjusted EBITDA margin was 11.8% , compared to 12.9% in Q3 last year .

Speaker #6: Net income for the quarter increased 17.4% from 7.5 million to 8.8 million , and earnings per diluted share grew 17.7% from $0.62 to $0.73 .

Speaker #6: Adjusted net income grew 16.4% from 10.9 million to 12.7 million , and adjusted earnings per diluted share grew 15.4% from $0.91 to $1 oh five .

Speaker #6: Turning to cash flow , our operating cash inflow during the third quarter was 13.3 million , compared to 4.9 million during the third quarter last year , primarily due to the timing of accrued expenses , offset by the timing of billings that impacted changes in working capital , free cash flow , defined as cash flow from operating activities , excluding changes in working capital minus capital expenditures , excluding our investment in additional rental equipment was 17.9 million in the third quarter compared to 13 million in Q3 last year .

Speaker #6: Representing a $4.8 million increase . Free cash flow conversion of adjusted EBITDA for the quarter was 82% versus 75.3% last year . For full year 2025 , 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 3 million .

Speaker #6: This amount excludes an additional investment of 3.5 million in rental equipment for 2025 , of which 2.1 million occurred in the first nine months of the year .

Speaker #6: Turning to our balance sheet , as of September 30th , we had 9.8 million in cash and cash equivalents , and total debt of 61.9 million , which includes 34.5 million borrowed on a revolving credit facility , of which 10 million is at a rate of an applicable margin , plus 3.12% .

Speaker #6: As a reminder , at the end of June , we expanded our revolving credit facility from 50 million to 100 million . On July 1st , we used a combination of cash and an additional drawdown of approximately 40 million to fund the Pioneer Power acquisition .

Speaker #6: During the quarter , we paid down the revolving credit facility 17.3 million , and as of September 30th , our total liquidity defined as cash and availability on our revolving credit facility , is 70.3 million .

Speaker #6: Additionally , we intend to deploy free cash flow to continue to reduce our borrowings under the revolving credit facility . With this 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 continued growth initiatives and strategic M&A transactions .

Speaker #6: That concludes our prepared remarks . I'll now ask the operator to begin Q&A .

Speaker #3: Thank you . We will now be conducting a question and answer session . If you would like to ask a question , please press star one on your telephone keypad .

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Speaker #3: One moment please . While we pull for questions . Thank you . Our first question comes from the line of Chris Moore with CGS securities .

Speaker #3: Please proceed .

Speaker #7: Hey , good morning guys . Thanks for taking a couple . Right . Good morning . Good morning . So it looks like 47.3 million of Q3 revenue was acquisition related , 37 million that Oder 10.3 GCR .

Speaker #7: Can you give us a sense in terms of how much revenue pioneer contributed to that ? You know , 47 million and the the split between Oder and GCR within pioneer ?

Speaker #5: Yeah , the pioneer power , they continue to produce , I think , even better than we thought they would produce . So we're thinking by year end the contribution for the second half of 2025 is closer to actually 60 million have weighted from an owner direct side as well to and I think a lot of that strong contribution is from the industrial segment as well to some shutdown work , strong customers and brand , which is always nice to validate .

Speaker #5: After we've had the acquisition as well too . I think the other thing too , even from a margin perspective , that we're really looking forward to from pioneer perspective , is the opportunity we see a lot of good , solid foundation from a pioneer power perspective , but at the same time , I think as we've right now , we're in the process of transitioning their finance and operating systems .

Speaker #5: But we already see signs of our ability to not only benchmark their gross profit, but look for opportunities as well.

Speaker #7: Got it . So the 60 million you're talking about for the second half , it looks like the bulk of that is is in Oder .

Speaker #7: Am I looking at that correctly ?

Speaker #5: Yes . Yeah . You are .

Speaker #7: Okay . And so just I got it that the gross margins are are should be coming up there . Why are they within their Oder segment .

Speaker #7: Why are they lower at this point in time ? Do they do different work for clients or are they focused on on on a different vertical ?

Speaker #7: Just any thoughts there ?

Speaker #5: Yeah , it's very interesting .

Speaker #8: You know , we've seen one of the main opportunities we look at with all our acquisitions is increase of margins . So this is a common playbook that we see .

Speaker #8: And a lot of times it comes down to they run a really good business . They have relationships . And it's a matter of understanding benchmarking as much as anything .

Speaker #8: Now that we've got even an even from an industrial base or even from other contracts that we purchase , we always take a look at from a margin perspective .

Speaker #8: A lot of times that's eye opening as well . Too . I think the other piece of it too , is how do they go to market ?

Speaker #8: They're going to market from a branding reputation perspective . But one of the key elements that we add to as a proactive sales team , and a lot of times that makes a difference .

Speaker #8: So at the end of the day , it's a matter of taking great customer relationships and a brand understanding . There's 4 or 5 triggers that allow us to expand margins over time .

Speaker #8: So even and we've looked at it not just from pioneer power , pioneer power , obviously is a bigger contributor , but even from the other acquisitions , there's always the same elements of over time , it takes time .

Speaker #8: But I would say it's still the same playbook and we see lots of opportunity .

Speaker #7: Got it . Very helpful . Maybe just the last one . Just as a as a percentage of revenue , 15.3% versus 18.7% in Q2 .

Speaker #7: The target range is coming down. Is it reasonable to think that CA as a percentage of revenue would tick up a bit in 2026 versus the 15 to 17 that we're talking about in 2025?

Speaker #8: Yeah , the big piece of that is a reduction was due to the different profile from pioneer of lower gross profit , but also lower G&A as well to there's some investments that we're going to need to make going into 2026 .

Speaker #8: And that's not only from a from a pioneer in other acquisitions , but also from an overall business as well to give me anything you want to comment on the .

Speaker #6: Yeah , because part of it .

Speaker #9: Too , I mean , we've had the lower rate , excuse me , this period for the fiscal year going into next year to , as Mike said , looking at investments and specifically around pioneer , that that , that proactive sales force piece of it .

Speaker #9: So we've not given good guidance yet for the next year .

Speaker #7: Fair enough . I appreciate it , guys . I'll jump back in line .

Speaker #8: Thank you .

Speaker #10: Chris .

Speaker #3: Thank you . Our next question comes from the line of Brian Brophy with Stifel . Please proceed .

Speaker #11: Thanks . Good morning everybody . I appreciate all the additional disclosure here . When I try to I guess back out PPI from odor .

Speaker #11: It looks like gross margins kind of on the core business were down a little bit from a year ago . Is that correct .

Speaker #11: And can you give us , I guess , a sense of the magnitude and what the driver was .

Speaker #8: You know , from a margin perspective , I'll let Jamie answer that from a financial exact number perspective . But our margins do end up fluctuating from a quarter to quarter basis .

Speaker #8: And I think it just depends on the mix of work that may be within the quarter . And , you know , one thing that you pointed out , even even as we mentioned , the script , is that combination of one third , two thirds that essentially goes through the business as well to where one third is that quick burning work in two thirds of the owner .

Speaker #8: Direct revenue is fixed price projects that are of average size year to date of 245,000 . So at the end of the day , nothing different from it's more of the of the quarter to quarter mix of whether it's that quick burning or it's a fixed price .

Speaker #8: Projects .

Speaker #9: Yeah , I was just going to reiterate that . Excuse me . Yeah , definitely in line . It'll fluctuate quarter to quarter based on the mix .

Speaker #9: And it's really the impact of the PPI margin for this quarter .

Speaker #11: Okay . Thanks . And then can you give us a sense on organic growth in the first half of the year ? I guess the 20 to 25% guidance for for 2025 seems to imply an acceleration in the fourth quarter .

Speaker #11: I just want to understand if that is accurate and what's driving that acceleration .

Speaker #8: Yep . Year to date we're 14.4% organic odor . And we've talked about a range of 20 to 25% for a full year .

Speaker #8: So that does imply some acceleration . A couple of things that we're really looking at , even from a Q4 perspective , continuing quick burning work from a revenue perspective , budgets that need to be spent by year end .

Speaker #8: A lot of people have delayed that opex spend in their position right now where they have to spend those dollars . Small projects that are turning .

Speaker #8: And I think that's also a result of that sales team . You know , the last three years we've invested in a sales team , the recent sales team , we've invested that we hired in Q4 and early Q1 .

Speaker #8: It's been about 9 or 12 months . We've been in position with customers and that allows us to give visibility , kind of looking into Q4 and from that perspective .

Speaker #11: Okay , that's very helpful . And then in your opening comments , you mentioned the 12 million of capital projects that were awarded from this facility Assessment Award that you talked about last quarter .

Speaker #11: Do you anticipate that potentially driving further awards or do you think that's kind of the extent of the opportunity , an additional follow on awards from these facility assessments ?

Speaker #8: Yeah , this is really exciting . So a couple of things that we've learned through our evolution . A lot of times on local relationships , the relationships will start with a maintenance project or really quick turning work on the national side of things .

Speaker #8: We've really started with healthcare , and we're thinking about data centers and industrials . We kind of expand going forward . A lot of times that work starts with professional services , facility assessments , engineering .

Speaker #8: It's a repositioning of that ultimate entry point and those customers are very much from a cost quality , consistency type perspective . So we've got a lot of these national relationships that we've started to , and they typically do start with that facility .

Speaker #8: Assessment . Ultimately . And then we come up with a pro forma . So that particular opportunity those 20 assessments turned into $12 million of projects over four different sites , three of which were outside of geography , one that's in .

Speaker #8: So I think I look going forward , we're excited about the opportunity from multiple customers , from multiple assessments . So that being kind of a runway for us to have another avenue of work that comes in , I think another interesting thing as well too , is it's kind of we're going to be a cross-section of having those local maintenance and service type agreements as quick project agreements , as well as kind of a as well as the national relationships .

Speaker #8: And the two of those meetings together are also a big opportunity for us as well to .

Speaker #11: Thanks . Appreciate the color there . Last , last one for me past three years you've talked about hiring about 40 sales people a year .

Speaker #11: Curious how you're thinking about investing in the sales staff this year . Relative to the prior pace .

Speaker #8: Yeah . So it's interesting . I think we're definitely looking at as we go into every year , like we've done the last three years , from a sales staff perspective , I think we've made a lot of hires over about 120 hires over that period of time .

Speaker #8: I think we're continuing to make sure that we're supporting our sales staff . I think that's going to be a big piece of next year from a sales enablement perspective as well , to what resources can we give them to make them successful ?

Speaker #8: How can we connect dots for them ? I think that'll be a big focus going into next year as well too . So it's almost as much sales enablement next year as as much as traditional sales staff .

Speaker #8: We also are looking forward to the to production as well too . It takes a long time to get sales staff up and running , but whether it's professional services , whether it's data analysis , whether it's financial analysis that we do for customers , those are the sort of things going into next year that we're really excited to make sure that we're making our sales staff as successful as possible .

Speaker #11: Thanks , everybody . I'll pass it on .

Speaker #3: Thank you . Our next question comes from the line of Rob Brown with Lake Street Capital . Please proceed .

Speaker #12: Good morning . Congratulations on all the progress . Kind of back to the organic growth . How do you think about the longer term organic growth ?

Speaker #12: It was it was the guidance . Tweaked it down a little bit this quarter . But what do you sort of think of as the long term organic growth .

Speaker #12: And what needs to happen to kind of get there ?

Speaker #8: Yeah . So from an organic growth perspective and of course , that it's a what we're doing from a GCR perspective , but also from an owner owner direct perspective .

Speaker #8: So let me touch on GCR real quick . Our goal is to be as selective as possible . So sometimes there'll be periods where GCR declines , like in this period .

Speaker #8: And that's a result of being super diligent about the quality of work. We are going to continue to push towards owner direct and be very opportunistic from that perspective, from the owner direct side of things.

Speaker #8: We're building a long term sales team and we're building a long term model to have success over multiple quarters and multiple years as well too .

Speaker #8: So we haven't given a target out beyond this year . We hope that the insight of the 20 to 25% owner direct Organic , will provide some insight to investors , but we're we're investing for the future .

Speaker #8: I will say that as well to .

Speaker #12: Okay . Thank you . And then on the opportunity for margin improvement overall and I guess at pioneer , how what sort of the timeline of that and maybe what can you get gross margins back to sort of where they've been .

Speaker #12: Is that the goal ?

Speaker #8: Yeah . For pioneer specifically , a lot of the work that we've done is transitioning to the accounting and operating system , which is important to us .

Speaker #8: It's not always the most exciting , but it's really important because it allows us to have visibility and to get on a common platform so that first phase , we talked about that first phase , including structure and gross profit benchmarking can almost take almost up to a year .

Speaker #8: But that doesn't mean we're not doing things along the way . And I think the first thing that we look at is the gross profit benchmarking is their opportunity , is their low hanging fruit .

Speaker #8: There has been on the other deals . We can't see why this wouldn't be any different . But I think as we look into next year , definitely from an opportunity from that perspective as well to I think from an overall business , it's a matter of our ability to sell in a proactive nature .

Speaker #8: We've been we've had great success over the last couple of years working with opex type work , understanding what customer needs are , and I'm going to point to a specific example that we talked about in the prepared remarks , was we had a customer in Florida , and we've been for the last 2 or 3 years .

Speaker #8: We've been really working from an OpEx perspective , taking care of all their problems . That's been high margin work as well . To they get to the point , where they're thinking , God , that's a lot of money that we're spending , and they end up in this .

Speaker #8: Quick period of pause. And it's our job at that point to say, listen, I know you're spinning a lot of topics and perspectives.

Speaker #8: You're going to have to spend a lot from an opex . But there's a reason that you're having that spend and that developed ultimately into a capital project where we saw deterioration and cooling system and built a former to get a an important capital project with multiple phases to fix their long term problems .

Speaker #8: So that's the type that's the type of relationship where we have that opex recurring spend a lot of times that opex spend will turn into capital projects , and those capital projects are not projects that we're competing against .

Speaker #8: Multiple people . We're working on creating a proforma , giving them cost certainty . And there's also an opportunity on a particular particular opportunity like that to earn really high margin as well , too .

Speaker #8: So it's a combination of continued improvement from pioneer power running our playbook as well as this , this dynamic between OpEx taking care of reactive relationships as well as developing proactive programs and projects as well too .

Speaker #8: That's where we see kind of our key components going into next year .

Speaker #12: Okay . Thank you for all the color . I'll turn it over .

Speaker #3: Thank you . Our next question comes from the line of Jerry Sweeny with Roth Capital Partners . Please proceed .

Speaker #13: Good morning , Mike and Jamie . Thanks for taking my call .

Speaker #10: Good morning . Good morning .

Speaker #13: I wanted to talk about , you know , it wouldn't be a conference call if everybody didn't ask about gross margins or . I'm sorry about the organic growth .

Speaker #13: So obviously there was some questions about hitting your range on organic growth . And you mentioned fourth quarter being relatively strong . You know , for lack of a better term .

Speaker #13: Are you anticipating a budget flush and gone back and looked at a couple fourth quarters versus three cues and not every year . But there's been several years when you see a significant uptick in revenue .

Speaker #13: So I want to get your thoughts on how that's going to occur .

Speaker #8: You know , I don't know if I would characterize it as budget flush , but I would characterize it as , you know , it's a cross section of two things that go on from our customer relationships , ensuring that they're properly spending their budgets as they exit the year .

Speaker #8: So there are opportunities where there's a lot of times customers tap . They're also thinking about what they're going to re-up next year as well too .

Speaker #8: So it's a dynamic of competing budgets for 25 and even some of the budgets that have been delayed , as well as what do I need to do in 2026 ?

Speaker #8: So it depends on the vertical , I think from a healthcare perspective , we have lots of conversations with customers from that perspective as well too .

Speaker #8: It could be from a higher end industrial manufacturing . Those customers have been pretty consistent from a spend perspective as well too . So it's really the dynamic between the two versus 25 versus 26 .

Speaker #8: But the key nature of our work is being in a mission critical facility . They may be able to pause it for a bit , but inevitably they're going to have to spend .

Speaker #8: And it's our job to make sure that they spend it wisely . Well , to so we're trying to manage that dynamic with them .

Speaker #13: Got it . How much visibility do you have in Oder as of today ? Can you see out to the end of the year ?

Speaker #13: Obviously, there could be some emergency work, etc. But you know what visibility and order really look like?

Speaker #10: Yeah .

Speaker #8: We gave some additional information and color of this dynamic , between one third of the work being quick burning work and then two thirds being smaller projects as well .

Speaker #8: So we hope that that provides some additional color as well to the one third work . You traditionally know when it comes , there's some avenues of things that needs to happen , but there's relative consistency from that perspective as well to the two thirds is is fixed price project work , but it is relatively small in nature as well too .

Speaker #8: So we really look at where the customers are at . We focus on a core group of customers understanding what their spend profiles as well too .

Speaker #8: I think the other thing too , that's part of the dynamic of the owner . Direct revenue is our ability that we have sales staff , the sales staff with certain pipelines dynamic with customers as well too .

Speaker #8: So it really comes down to the one third , two third , as well as the dynamic of where the customers are from .

Speaker #8: A budget perspective . As we I feel like we move into future years , we're going to continue to increase visibility from that perspective as well to .

Speaker #13: Got it . Switching gears , you talked a little bit about , you know , local , you know , local growth or local , you know , developing relationships on the local level , which certainly has its benefits , but also looking to develop , you know , national relationships .

Speaker #13: How far along are you on the ladder on the sort of national relationship in terms of sales ? Building that , building that out there ?

Speaker #13: There are different animals , local and national .

Speaker #8: It's interesting . We've probably been when we first started out , we thought that this would go super quick and we probably started with 4 or 5 years ago .

Speaker #8: And you realize it takes time and you're cracking in different levels from a customer perspective and big customers that may not be C-suite or may be a couple levels down .

Speaker #8: So we went at it for probably 4 or 5 years now , but this year , I think more than others , we've finally been in a position where they trust us .

Speaker #8: They've given us that pilot work project . And by the way , this this work consists of running a facility program over multiple facilities .

Speaker #8: It could be project work , engineering work , staff augmentation . We've done . So we've put all that hard work in there , and that's allowed us to say , okay , I'm going to give you a bigger the budget .

Speaker #8: As an example of that $12 million of projects that came out of those facility assessments , we couldn't have got that two years ago .

Speaker #8: They wouldn't have trusted us at that point . A lot of times they're in a position where they've got to spend the dollars .

Speaker #8: They've gone through the work , and it's not really a matter of competition at that point . So we're starting to see a blueprint with healthcare , and we feel like we can apply that same blueprint to some of our other verticals as well , too , whether it's industrial , manufacturing or it's data center and tech .

Speaker #8: We feel like there's a blueprint, so we're looking at those as well too. Hopefully, we're looking at it as not taking as long because we're going to apply the same blueprint.

Speaker #8: But the key is acting as a trusted advisor through a professional service type offering and allowing us to make long piece of term decisions with them and being in a position when they have that spend that needs to happen .

Speaker #13: Got it. I appreciate it. I'll jump back to you. Thanks.

Speaker #3: Thank you . There are no further questions at this time . I'd like to pass the floor back over to Mike McCann for closing remarks .

Speaker #8: And closing our priorities . Priorities . As we close out 2025 are as following , continuing to drive top line growth further expanding our customer relationships to turn technical sales into financial sales .

Speaker #8: Ongoing successful integration of pioneer and building our M&A pipeline at Limbok , we're building a long term business model to design to . Deliver durable demand over time .

Speaker #8: We're making strategic investments where others may not , and we bring a unique combination of account focused engineering expertise and the ability to execute those solutions directly with building owners .

Speaker #8: These relationships are rooted in long term partnership , where through consultative engagement , we're helping our clients develop multi-year capital plans that go beyond traditional backlog .

Speaker #8: We believe this differentiated business model positions us for a sustained growth and risk adjusted returns . We look forward to meeting speaking with you , many of you , before the end of the year on December 2nd .

Speaker #8: We're attending the UBS Global Industrials and Transportation Conference in Florida . We hope to see some of you there . Thank you again for your interest in and have a great rest of your day .