Limbach Holdings, Inc.

Good morning and welcome to the second quarter 2024 Limbaugh-Colings 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 begin.

Good morning, and thank you for joining us today to discuss Limbach Holdings financial results for the second quarter of 2024. Yesterday, Limbach Holdings 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 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 Jamie Brooks, Executive Vice President and Chief Financial Officer. We will begin with prepared remarks and then open up the call for 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. 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 LIMBOX SEC filings, including reports on Form 10-K and 10-Q. 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 LIMBOC'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.

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 Limbaugh. So I think it's important to recap our strategy because it's at the heart of everything we're doing as a company. We have a three-pillar strategy to change the way we do business. It differentiates 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 creates value for them, 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. 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. As an example, recently one of our data center customers approached us about performing additional work. 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 continued to develop our partnership with our customer and demonstrated firsthand the value that Lombok 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 by the end of this year. ODR would comprise of 65 to 70% of our revenue. That compares to 50% last year. For 2-2, we're at 67.7%, so we're well on our way to making this strategic transition a reality. We have seen ODR revenue grow at 19.3% CAGR from 2019 to 2023. and believe in the future when the mix of the businesses hits approximately 80% of ODR and 20% GCR, which would include the impact of acquisitions, we see the top-line total revenue growth and continued margin expansion. The second pillar of our strategy is to further expand gross 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 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. Now we can provide this service directly at attractive margins. This service offering expansion has proven quite successful as we've 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. The third pillar of our strategy is scale the business. Add key service offerings and expand our footprint 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. We focus on six key verticals, healthcare, 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 infrastructure. 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 is 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 10 key customers, 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. As our footprint grows through acquisition, the ability to capture market share should increase significantly. This approach allows us to capitalize on synergistic opportunities while maintaining level diversity through 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. 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. 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. 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 competitive pricing, we presented a value-based solution that cannot be compared and therefore commoditized. The account manager relationships is key. We are successfully transitioning staff from the GCR side of the business to onsite account managers on the owner 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. 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. Jamie will get into specifics of our second quarter results, but our record second quarter total gross margin and approved free cash flow conversion are evidence that our strategy is working. The alignment and commitment to the company's strategy by our amazing employees makes our success possible. I'll now turn it over to Jamie to provide more detailed financial highlights before I return with additional commentary.