Limbach Holdings, Inc.

Good morning, and welcome to the fourth quarter and fiscal year 2024 Limbach Holdings, Inc. Earnings Conference Call and Webcast. All participants will be in a listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. I will now turn the conference over to your host, Julie Cagley of Financial Profiles. You may begin. Thank you.

Good morning, and thank you for joining us today to discuss Limbach Holdings' financial results for the fourth quarter and fiscal year 2024. Yesterday, Limbach issued its earnings release and filed its Form 10-K for the period ended December 31, 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. 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 the call to your 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 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 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 non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in our fourth quarter and fiscal year 2024 earnings release and in our investor presentation, both of which can be found on LIMBOX Investor Relations website and have been furnished on the Form 8-K filed with the SEC. With that, I will now turn the call over to President and CEO, Mike McCann.

Good morning. Welcome to our stockholders, analysts, and interested investors. We appreciate you joining us today. Throughout 2024, our focus was creating value for our customers, driving margin expansion, and delivering record profitability for our stockholders by continuing to execute the three pillars of our strategy. Our first pillar is shifting our revenue mix from new construction projects in the general contractor or GCR segment to working directly for building owners in existing facilities in the owner direct or ODR segment. In 2024, approximately 67% of total revenue came from our owner direct segment, contributing 75% of total gross profit dollars. The second pillar is the evolution of our offerings, which expands our capabilities and increases our margins. In 2024, total gross margin increased meaningfully to 27.8% from 23.1% in 2023. Our third pillar is to scale our business through acquisitions. In 2024, we completed two strategic acquisitions, which should add approximately $6 million to our adjusted EBITDA in 2025. We maintained a disciplined approach by focusing on six mission-critical market verticals that drive consistent demand across economic cycles. Among these, healthcare has emerged as our largest and most significant vertical, where we play a critical role in ensuring the operational continuity of medical facilities, enabling them to deliver lifesaving care. According to the American Hospital Association, the U.S. healthcare market needs hundreds of billions of dollars in capital investment to address its infrastructure deficiencies workforce challenges, and technological gaps while ensuring readiness for future public health emergencies. Each of our 20 locations prioritizes healthcare services, and we are actively expanding our national footprint in this sector. This growth positions us to become a trusted enterprise partner, delivering comprehensive solutions across the markets we serve. We have seen reoccurring revenue develop for these customers as those relationships evolve. One great example is a hospital group in the Philadelphia market, which has over 1,000 licensed beds. We have been working at this facility for several years, but last year we decided to double down on the account and add a dedicated on-site account manager. After six months of extreme focus, we built a strong relationship with the facility manager, proactively inspecting areas of the hospital that experienced deferred maintenance. Things finally started to break free after several system failures, and we started to see a much larger transaction volume. Right now, we're in the process of repairing and replacing their entire steam system, while the facility is being supported by temporary heating equipment. Our long-term go-to-market approach with customers puts Limbach in a position to capture this revenue and continue cultivating this long-term relationship. Our second largest vertical has become industrial manufacturing. As a result of our strategic acquisitions over the past few years, We partner with facility owners to support their complex systems in order to ensure the lines and manufacturing processes continue running smoothly in the existing facilities. Our company is well poised to address significant upgrades to systems and facilities from compliance with regulatory standards to the possibility of increased reshoring and nearshoring to address supply chain resilience. One of our larger customers in this space has multiple manufacturing facilities in several states. They base their infrastructure program directly around our engineered solutions and equipment lines, which controls temperature, humidity, while filtering and cleansing the air in the environment. They trust our ability to provide installed solutions around our equipment, evidenced by our growing installed base in most of their locations. We collaborate with this customer to resolve their business challenges as a partnership. In our other four verticals, we continue to see growth opportunities. Existing buildings age and need either critical repair work or an upgraded building system solution to keep the building's environments at an optimal temperature and humidity levels. One of our largest customers traditionally has a billion and a half infrastructure budget and is still unable to be as proactive as they need to be in order to avoid equipment failures. To support these systems, we've placed an incredible staff of people specializing in mission-critical work within these key facilities, making us an integral team member to the existing building owner. In many cases, particularly due to labor concerns from the owner, we've augmented their staff. As a building system solutions firm, we typically go to market differently than a contractor. We're expanding wallets here with our existing customers when they're existing facilities and solving complex problems with engineered solutions. We focus on large-scale customers with multiple facilities by assigning an on-site account manager to learn the building and earn the trust of the customer through day-to-day problem solving. We assign additional resources to augment our customers' building staff through either a master service agreement or a maintenance contract. Once we have built that relationship, we offer our capital planning services, allowing us to develop a long-term vision for the building and related capital projects. Our objective is to build an entire account team that becomes an indispensable partner to the customer, focusing on future long-term repeatable revenue opportunities. This is an important differentiator for LIMBOC. We're often compared to engineering construction companies. However, while our competition is focused on new construction, we have spent the last five years transitioning our business to working directly with building owners in existing facilities. We are now delivering on demand repairs and system solutions for their existing facilities, We're building a unique long-term model with durable demand, allowing for shorter sales cycles. In our past GCR model, backlog was critical to our future as the projects could last up to three years in duration under a fixed price agreement. Whereas now we're able to share price increases on materials with our customers. With our ODR focus, we've gone a different direction, building a durable model by collaborating with building owners, providing quick hit repair type work on a TNM basis along with building system solutions that provide value to our customers and drive higher margin. We continue to evolve and optimize our business mix towards ODR segment, create a high margin, sustainable business with a repeatable revenue across all cycles. Our M&A strategy is a key part of our growth. As I noted earlier, as a result of past acquisitions, industrial manufacturing has become our second largest vertical. To that end, most recently we acquired Consolidated Mechanical December, a leading provider of industrial facility system solutions serving Kentucky, Michigan, and Illinois, expanding our owner-direct relationships and footprint. Other than our typical system integration, which is nearly complete, the cultural fit has allowed us to integrate quickly, and we've added focused sales resources that can help expand WalletShare with already existing building owners. We believe the breadth of our national resources combined with local relationships will enable us to expand both quality and quantity of their gross profit contribution. Over the past three years, we've acquired five companies, and with each acquisition, our process has become more efficient and repeatable. Our goal is to fully integrate each acquired company into our shared systems and strategies within two to three years of closing. Expanding it to new geographic areas through these acquisitions helps Limbaugh grow its footprint and better serve our national customers many of whom operate in more than 10 states. This approach is expected to drive revenue growth, reduce sales costs, and ultimately leverage our SG&A. We have a strong pipeline of acquisitions opportunities that meet our criteria of fitting culturally, building a niche, prioritizing building on relationships, and are accretive on a free cash flow basis. Our target is to acquire $8 to $10 million in adjusted EBITDA per year and apply our scalable value creation process to drive growth and long-term impact. As we continue to execute our strategy, our mix shift should normalize to approximately 80% owner direct revenue and 20% general contractor revenue. In 2025, we expect our ODR revenue to land between 70% to 80% of total revenue for the full year. Once our mix reaches 80-20, we believe we'll begin to generate considerable consolidated revenue growth. Over time, we anticipate our evolved offerings will expand our gross margins to comparable levels of OEMs. that provide similar solutions to those offered by the company, which tend to be in the 35% to 40% range. Looking forward to 2025, we expect organic top-line revenue growth to be in the 10% to 15% range for the full year. When we layer on two acquisitions from 2024, we anticipate total revenue in the range of $610 million to $630 million. For the past few years, as we continued our shift towards ODR revenue, which has seen more seasonality in the business. The first quarter tends to be our softest quarter with the second half of the year being stronger than the first half of the year. Going into 2025, we expect the same seasonality with Q1 2025 being similar to Q1 2024 with an even stronger second half of the year. With our expected revenue growth for 2025 and the continued focus on improving our total gross margin, we expect adjusted EBITDA for 2025 to be in the range of $78 million to $82 million. While 2024 was a very strong year for execution and results, we were still in the early innings of shifting to our three pillar strategy. There are plenty of growth opportunities ahead with geographic footprint expansion, gross margin opportunity, both for mixed shift and evolving our offerings, and tremendous opportunity for mission critical owners with aging infrastructure. Like now to turn the call over to Jamie for financial results.