Good morning, and welcome to the Limbach Holdings Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to your host, Lisa Fortuna of Financial Profiles. You may proceed.

Good morning, and thank you for joining us today to discuss Limbach Holdings' 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 30, 2025. 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 Jayme Brooks, Executive Vice President and Chief Financial Officer. 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. 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 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 Limbach's 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 third quarter 2025 earnings release and in our investor presentation, both of which can be found on Limbach's 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.

Good morning, and welcome, everyone. Thank you for joining us today. At Limbach, we play a critical role as an enterprise provider of building system solutions, ensuring the reliability and continuity of mission-critical infrastructure across our customers' facilities. 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. As a reminder, our growth strategy is underpinned by three core pillars. The first pillar is scaling our owner-direct relationships or ODR business. Here, we're focused on working in partnership with owners of mission-critical facilities in existing building environments. This work consists mostly of routine maintenance, emergency repairs, small capital projects, and larger retrofit and renovation projects. Some of this work is contractual and some is predictable given the age and complexity of mechanical systems. The second pillar is enhancing profitability and increasing wallet share through the introduction of expanded product and service offerings. 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. 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. As our capability expand over time, we can deliver more value to both the owner and Limbach. Unlike traditional E&C firms that rely on reactive bidding in response to a project, we're seeing these facilities 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, we're formalizing a scalable structure by building a proactive sales team that positions Limbach as a building system solutions provider. The third pillar is…

Our Form 10-Q and earnings press release filed yesterday provide comprehensive details of our financial results, so I will focus on the highlights for the third quarter. 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. Total revenue growth was 37.8%, while ODR revenue grew 52% to $141.4 million. Of the total ODR revenue growth of 52%, 39.8% was from acquisitions and 12.2% was organic. GCR 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 ODR. ODR 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 ODR segment. 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. Our strategy with acquisitions is focused on improving the acquired company's gross margin to align with our broader operating model over time. ODR gross profit comprised approximately 80% of the total gross profit dollars or $35.7 million. ODR gross profit increased $6 million or 20.3%, driven by higher sales volume, partially offset by lower ODR segment margins of 25.2% compared to 31.9% in the year ago period. The decrease in segment margin was primarily attributable to Pioneer Power's lower gross margin profile. GCR 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. SG&A expense for the third quarter was $28.3…

[Operator Instructions] Our first question comes from the line of Chris Moore with CJS Securities.

So it looks like $47.3 million of Q3 revenue was acquisition-related, $37 million of that ODR, $10.3 million GCR. Can you give us a sense in terms of how much revenue Pioneer contributed to that $47 million and the split between ODR and GCR within Pioneer?

Yes. 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, heavily weighted from an owner direct side as well, too. And I think a lot of that strong contribution is from the Industrial segment as well, too, some shutdown work, strong customers and brand, which is always nice to validate 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 a 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, but we already see signs of our ability to not only benchmark their gross profit, but to look for opportunities as well, too.

Got it. So the $60 million you're talking about for the second half, it looks like the bulk of that is in ODR. Am I looking at that correctly?

Yes. Yes, you are.

Okay. And so just -- I got it that the gross margins are -- should be coming up there. Why are they -- within their ODR segment, why are they lower at this point in time? Do they do different work for clients? Are they focused on a different vertical? Just any thoughts there?

Yes, it's very interesting. We've seen -- one of the main opportunities we look at with all their acquisitions is increase of margin. So this is the common playbook that we see. 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 now that we've got -- even from an industrial base or even from other contracts that we purchased, we always take a look at it from a margin perspective. A lot of times, that's eye-opening as well, too. I think the other piece of it, too, is how they go to market. They're going to market from a branding reputation perspective. But one of the key elements that we add to is a proactive sales team. And a lot of times, that makes a difference. 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. 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, it's always the same elements over time. It takes time, but I would say it's still the same playbook, and we see lots of opportunity.

Got it. Very helpful. Maybe just the last one. Just SG&A as a percentage of revenue, 15.3% versus 18.7% in Q2. The target range is coming down. Is it reasonable to think that SG&A as a percentage of revenue would tick up a bit in '26 versus the 15% to 17% that we're talking about in '25?

Yes. The big piece of that SG&A reduction was due to the different profile from Pioneer of lower gross profit, but also lower of SG&A as well, too. There's some investments that we're going to need to make going into 2026. And that's not only from a Pioneer and other acquisitions, but also from an overall business as well, too. Jayme, anything you want to comment on that?

Yes, because part of it to get -- I mean, we have a lower rate this period for the fiscal year. But going into next year, too, as Mike said, looking at specifically around Pioneer that proactive sales force piece of it. So we've not given the guidance yet for the next year.

Our next question comes from the line of Brian Brophy with Stifel.

I appreciate all the additional disclosure here. When I try to, I guess, back out PPI from ODR, it looks like gross margins kind of on the core business were down a little bit from a year ago. Is that correct? And can you give us, I guess, a sense of the magnitude and what the driver was?

From a margin perspective, I'll let Jayme answer from the financial exact number perspective. But our margins do end up fluctuating from a quarter-to-quarter basis. And I think it just depends on the mix of work that may be within the quarter. And one thing that you pointed out even as we mentioned in the script, is that combination of 1/3, 2/3 essentially goes through the business as well, too, where 1/3 is that quick burning work and 2/3 of the owner 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 that dynamic of the quarter-to-quarter mix of whether it's that quick burning or it's fixed-price projects.

Yes, I was just going to reiterate that. Yes, definitely in line -- it will fluctuate quarter-to-quarter based on the mix, and it's really the impact of the PPI margin for this quarter.

Okay. And then can you give us a sense on ODR organic growth in the first half of the year? I guess the 20% to 25% guidance for 2025 seems to imply an acceleration in the fourth quarter. I just want to understand if that is accurate and what's driving that acceleration?

Yes. Year-to-date, we're 14.4% organic ODR, and we've talked about a range of 20% to 25% for a full year. 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. A lot of people have delayed that OpEx spend and they're in a position right now where they have to spend those dollars, small projects that are churning. And I think that's also a result of that sales team. The last 3 years, we've invested in the sales team. The recent sales team investment that we hired in Q4 and early Q1, 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 from that perspective.

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. Do you anticipate that potentially driving further awards? Or do you think that's kind of the extent of the opportunity and additional follow-on awards from these facility assessments?

Yes. 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, we really started with healthcare. We're thinking about data centers and industrial as we kind of expand going forward. A lot of times, that work starts with professional services. Facility assessment, engineering, it's a repositioning of that ultimate entry point. And those customers are very much from a cost certainty, 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 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 a geography, that's in. So I think I look going forward, we're excited about the opportunity for multiple customers from multiple assessments of 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 -- as well as the national relationships. And the two of those meeting together are also a big opportunity for us as well, too.

Appreciate the color there. Last one for me. Past 3 years, you've talked about hiring about 40 salespeople a year. Curious how you're thinking about investing in the sales staff this year relative to kind of the prior pace.

Yes. So it's interesting. I think we're definitely looking at -- as we go into every year like we've done in the last 3 years from a sales staff perspective. I think we've made a lot of hires over about 120 hires over that period of time. 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, too. What resources can we give them to make them successful? How can we connect dots for them? I think that will be a big focus going into next year as well, too. So it's almost as much sales enablement next year as much as traditional sales staff. We also are looking forward 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.

Our next question comes from the line of Rob Brown with Lake Street Capital.

Congrats on the progress. Kind of back to the organic growth, how do you think about the longer-term organic growth? 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 and what needs to happen to kind of get there?

Yes. So from an organic growth perspective, and of course, that -- it's what we're doing from a GCR perspective, but also from an owner-direct perspective. So let me touch on GCR real quick. Our goal is to be as selective as possible. So sometimes there will be periods where GCR declines like in this period. And that's a result of being super diligent to quality of work. And we're going to continue to push towards owner direct and be very opportunistic from that perspective. From an owner-direct side of things, 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. 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 investing for the future. I will say that as well, too.

Okay. And then on kind of the opportunity for margin improvement overall, and I guess at Pioneer, how -- what's sort of the time line of that? And maybe what's -- can you get gross margins back to sort of where they've been? Is that the goal?

Yes. 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. 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. 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 there opportunity? Is there a low-hanging fruit? 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, too. I think from an overall business, it's a matter of our ability to sell in a proactive nature. We've been -- we've had great success over the last couple of years of working with OpEx type work, understanding what customers' 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, we've been really working from an OpEx perspective, taking care of all their problems. That's been high-margin work as well, too. They get to the point, though, where they're thinking, that's a lot of money that we're spending. And they end up in this quick period of pause. And it's our job at that point to say, listen, I know you're spending a lot from an OpEx perspective. You're going to have to spend a lot from an OpEx perspective. But there's a reason that you're having that spend. And that developed ultimately into a capital project where we saw deterioration in the cooling system, and built something to get an important capital project with multiple phases to fix their long-term problem. So 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 multiple people. We're working on creating a pro forma, giving them cost certainty. And there's also an opportunity on -- a particular opportunity like that to earn really high margin as well, too. So it's a combination of continued improvement from Pioneer Power, running our playbook as well as this dynamic between OpEx, taking care of reactive relationships as well as developing proactive programs and projects as well, too. That's where we see kind of our key components going into next year.

Our next question comes from the line of Gerry Sweeney with ROTH Capital Partners.

I want to talk about -- it wouldn't be at the conference call if everybody didn't ask about gross margins -- or I'm sorry, about the organic growth. So obviously, there were some questions about hitting your range on organic growth. And you mentioned fourth quarter being relatively strong. For lack of a better term, are you anticipating a budget flush? And I've gone back and looked at a couple of fourth quarters versus 3Q and not every year, but there's been several years when you see a significant uptick in revenue. So I want to get your thoughts on how that's going to occur.

I don't know if I would characterize it as budget flush, but I would characterize it as -- 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. So there are opportunities where there's a lot of times [Technical Difficulty]. We're also thinking about what they're going to re-up next year as well, too. So it's a dynamic of completing budgets for '25 and even some of the budgets that have been delayed as well as what do I need to do in 2026. 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. It could be from a higher ed. 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. But the key nature of our work is being in a mission-critical facility. Then maybe they'll pause it for, but inevitably, they're going to have to spend, and it's our job to make sure that they spend it as well too. And so we're trying to manage that dynamic with them.

Got it. How much visibility do you have in ODR? Like as of today, can you see out to the end of the year? Obviously, there could be some emergency work, et cetera. But what does visibility in ODR really look like?

Yes. We gave some additional information and color of this dynamic between 1/3 of the work being quick burning work and then 2/3 being smaller projects as well, too. And we hope that, that provides some additional color as well, too. The 1/3 work you traditionally know when it comes, there are some avenues of things that needs to happen, but there's relative consistency from that perspective as well, too. The 2/3 is fixed price project work, but it is relatively small in nature as well, too. So if 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. 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. So it really comes down to the 1/3, 2/3 as well as the dynamic of where the customers are from 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, too.

Got it. Switching gears, you talked a little bit about local growth or developing relationships on the local level, which certainly has its benefits, but also looking to develop national relationships. How far along are you on the ladder on the sort of national relationship in terms of sales, building that out? There are different animals, local and national.

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. And you realize like it takes time and you're cracking in different levels from a customer perspective. Big customers, it may not be C-suite or may be a couple of levels down. We've been 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, they've given us that pilot work project. And by the way, this work consists of running a facility program over multiple facilities. 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 piece of the budget. As an example, that $12 million of projects that came out of those facility assessments, we couldn't have got that 2 years ago. 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, 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 data center and tech, we feel like there's a blueprint. So we're looking at those as well, too. And hopefully, we're looking at it as not taking as long because we're going to apply the same blueprint. But the key is that's acting as a trusted advisor through a professional service type offering and allowing us to make long-term decisions with them and being in a position when they have that spend that needs to happen.

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

In closing, our 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, ongoing successful integration of Pioneer in building our M&A pipeline. At Limbach, we're building a long-term business model designed to deliver durable demand over time. We're making strategic investments where others may not, and we bring a unique combination of an account focused, engineering expertise and the ability to execute those solutions directly with building owners. These relationships are rooted in a long-term partnership, where through consultative engagement, we're helping our clients develop multiyear capital plans that go beyond traditional backlog. We believe this differentiated business model positions us for sustained growth and risk-adjusted returns. We look forward to meeting and speaking with many of you before the end of the year. On December 2, 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 Limbach, and have a great rest of your day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.