Good morning. And welcome to the Second Quarter 2024 Limbach Holdings Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] 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 Jayme 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 Limbach 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 Limbach Investor Relations’ website and have been furnished in the Form 8-K 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 Limbach. So I think it’s important to recap our strategy because this is 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 create value for them, which gives us the opportunity to earn higher margins. At the same time, we are 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 Limbach can bring to the table. Because of this, the building owner now deploys our team on the most technical projects…

Thanks, Mike. Our 2024 second quarter earnings press release and Form 10-Q, which provides comprehensive details of our financial results, were filed yesterday and can be found on our website. I will focus on the highlights from the second quarter. During the quarter, we generated total revenue of $122.2 million versus $124.9 million in Q2 2023, and as we expected, total revenue declined by 2.1% due to our purposeful shift to our ODR business. ODR revenue grew 40.8% to $82.8 million, while GCR revenue declined 40.3% to $39.5 million. As Mike indicated, the decline in GCR revenue is intentional as we continue to execute our strategy to ODR. In the second quarter, ODR revenue was 67.7% of total revenue, up from 47.1% last year. This increase from Q2 2023 is driving our gross profit and adjusted EBITDA results. Our ODR backlog at quarter end was $177.7 million, compared to $147 million at December 31, 2023. GCR backlog was $151.6 million, compared to $186.9 million at December 31. The increase in ODR backlog and decrease in GCR backlog are due to our continued focus on accelerating the growth of our high margin ODR business. It’s important to keep in mind, however, that backlog is the ODR segment does not reflect our full book of business, as many ODR projects are short-term in nature and get sold and completed before becoming part of the backlog at the end of the quarter. Total gross profit increased 17.5% to $33.5 million for the quarter, from $28.5 million in Q2 2023, reflecting our mixed strategy to ODR. ODR gross profit comprised 75.7% of total gross profit dollars or $25.4 million. ODR gross profit increased $8.1 million or 47.1%, driven by higher revenue, with expanded gross margin in Q2 to 30.6% versus 29.3% in Q2 of…

Thank you, Jayme. We believe Limbach is well-positioned for sustained profitability, continued growth and stability through economic cycles. But I think the genuinely exciting part of our story is there’s still much more to be achieved in our business transformation. There is more to come as we move towards the optimal business mix between ODR and GCR, add additional service offerings and growth through acquisitions. The potential I see is extremely encouraging. As we continue to pick up the pace on transition to business, we’re increasing our total revenue and adjusted EBITDA guidance ranges for the full year 2024. Adjusted EBITDA for the full year is now expected to be in the range of $55 million to $58 million, which is up from our previous guidance of $51 million to $55 million that we presented in Q1. And our expected full year total revenue guidance range is now $515 million to $535 million, up from $510 million to $530 million, which is our previous range. We’re maintaining our annual goal of 65% to 70% ODR revenue as a percentage of total revenue. That concludes our prepared remarks. I’ll now ask the operator to begin the Q&A.

Thank you. [Operator Instructions] And our first question comes from Rob Brown from Lake Street Capital. Go ahead, Rob.

Good morning and congratulations on a good quarter.

Good morning, Rob.

First question is on sort of the strength areas you’re seeing in terms of verticals that you’re in. I know there’s the shift going on, but where are you seeing kind of market strength and demand as you plot your strategies?

Sure, Rob. I -- when I think about our verticals, I always think about the nature of the customers, and they’re mission critical. They can’t afford downtime. And I think that’s really helped us. So just to kind of go through them at a high level. Healthcare, every one -- just to remind, every one of our locations, that’s a vertical market that they’re super focused on. So we like the ability to be relatively stable. The other thing I think we’re seeing within healthcare is tremendous deferred maintenance. That deferred maintenance has probably gone on for three years or four years. We’re talking to a lot of our customers about the fact that they need to continue to reinvest in their buildings, so that’s going to produce future capital projects. And I think our ability to deploy onsite account managers is going to allow us to really get to know their building and be well positioned from a capital project in the next couple years. Industrial manufacturing continues to be strong in the middle of the country for us. Continuing reinvestment in facilities, upgrades, different lines that are being added, so that continues to be strong. Data centers, as I mentioned earlier, not necessarily in every one of our locations, but there’s some strength that we’re seeing from existing infrastructure upgrades from that standpoint. And lastly, I would say in the higher ed, life science type market, the customers that we have that have those mission critical labs that can’t afford downtime, they continue to be good, durable spenders. So, in conclusion, the vertical is definitely having that mission critical, can’t afford downtime, again, I think really helps us and should help us in the future.

Okay. Thank you. And then in terms of your kind of EBITDA margin expansion has been very strong, what’s sort of the goal that you think this can get to in terms of EBITDA margin as this makeshift fully takes hold?

Rob, when you think about our strategy, I was -- and I mentioned this obviously before too, you think about in terms of our three different pillars. The first pillar is obviously shifting from primarily GCR to primary owner direct and we’re well on the way for that. And that’s going to be able to obviously produce some lift and that’s what’s really helped us the last couple years. The second leg of the stool is really our ability to evolve offering to produce a lot higher margin. So, that’s going to produce another ability from a gain from that perspective. And then you think about the third piece of it from an acquisition perspective. That’s going to help us enhance offerings that we’re looking to introduce, as well as scale, footprint and eventually leverage over a period of time. So, we think there’s lots of room to go and I think about where we’re at even from our first pillar. Getting through that first pillar, we’re all on our way from that, but I think there’s a lot more to come down the line as well too.

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

Yeah. So, I think, we’ve seen -- there’s a couple things with the rental. Obviously, we invested this year $4 million in rental equipment and it’s really nice to see this summer that this equipment is really starting to move. One thing I think from, so I think, obviously, it’s working. Then we’re going to be thinking about, obviously, we’re going to take a hard look and think about that going forward as well too. That would be a good business decision. But one thing I wanted to point out in one of the examples that we gave, when I think about rentals and we think about rentals, it’s just another piece that we can bundle into an overall solution. We have an industrial client that they were looking for upgrades, and sometimes the clients will take some time to make decisions. Meanwhile, they have a need their facilities down. That’s where the rental fleet comes in perfectly. We can really provide that end-to-end solution. Here’s the rental equipment and cooling equipment you need to keep going. That allows you and gives you a little bit of time to make a decision and it just makes a lot of sense while we’re providing the rental equipment for us to get the infrastructure upgrade as well too. So, we’re going to wait and see how it goes this summer, but we’re really very excited about our deployment so far. And again, building these rental fleet into an overall bundled solution is obviously something that we’re looking forward to in the future.

All right. Thank you. I’ll turn it over.

[Operator Instructions] At this time, I see no further questions. I’d like to turn it back to Mike for any closing remarks.

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