Greetings. And welcome to Limbach Holdings’ First Quarter 2022 Earnings. Please note that this call is being recorded. I will now turn the conference over to our host, Jeremy Hellman of the Equity Group. Thank you. You may begin.

Thank you very much and good morning, everyone. Yesterday, Limbach Holdings announced its first quarter 2022 results, filed its Form 10-K for the quarter ended March 31, 2022. During this call, the company will be reviewing those results and providing an update on current market conditions. Today’s discussion may contain forward-looking statements, and actual results may differ from any forecasts, projections, or similar statements made during the earnings call. Listeners are reminded to review the company’s annual report on Form 10-K and quarterly reports on Form 10-Q for risk factors that may cause the actual results to differ from forward-looking statements made during the earnings call. With that, I will turn the call over to Charlie Bacon, the President and Chief Executive Officer of Limbach Holdings.

Good morning and welcome everyone, and thanks for joining us. Joining me today is our Chief Financial Officer, Jayme Brooks, and our Chief Operating Officer, Mike McCann. Matt Katz, our Executive Vice President of Acquisitions and Capital Markets had a late personal conflict and will join us for the call this morning. He will be available later today and this week if there are any follow-up questions. I'll be covering our business highlights and business conditions and provide our financial guidance for 2022. Jayme and Mike will discuss our financial and operating results. I'll also provide an update on the continued integration of Jake Marshall and discuss the current acquisition environment and pipeline. We have many employees joining us for these calls, and I want to start off by thanking them. Collectively, we've worked our way through the past two COVID-impacted years while improving our operations across the board. From our strategy of moving to higher margin ODR services to improving our GCR execution, I want to recognize all of you for an incredible effort. All of this has been occurring while we uphold our 'We Care' core value, which led to another period of terrific sales performance. We closed down 2021 in short fashion highlighted by solid execution which saw us deliver our financial guidance that we provided earlier in the year. That marked two years of achieving our financial goals, all while successfully executing a transformational strategic change in our business and dealing with the impacts of the pandemic. We firmly believe that the results of the last two years confirm the validity of the strategic shift to ODR and our ability to successfully execute on that plan. Plain and simple, the ODR business has more predictable revenue, higher margins, and less risk of execution. As such, a business that fits this profile should trade at much higher multiples of revenue and cash flow than a GCR-focused business. Quarter-to-quarter results will reflect the volatility that is characteristic of our industry. But we firmly believe that the long-term trend of moving to the owner-direct model while improving GCR execution will continue to improve results. On our last call, we also noted that we expected 2022 to be similar to 2021, with the expectation of a stronger second half, and that continues to be our expectation. On guidance for the year, we currently expect revenue to be in the range of $510 million to $540 million and adjusted EBITDA to be in the range of $25 million to $29 million. Our goal is to close on at least one acquisition this year; however, this 2022 guidance does not include the financial impact of that transaction since the timing of any acquisition within the calendar year is uncertain. Before I hand the call off to Jayme and Mike to address financial operations, I want to touch on the general economic picture impacting the business. We think the demand picture of our primary market sectors remains positive. Based on the recent FMI second quarter outlook along with the American Institute of Architects Building Index report, what we're seeing on the ground is that healthcare is forecasted for steady expenditures, but there could be a shift of capital for Greenfield construction to retrofitting facilities due to rising utility costs, which should be positive for us. Datacenters are expected to expand, and we are continuing to enjoy a solid relationship with the major datacenter operators. Our Boston area of operation has seen good levels of research and development facility demand from the biotech and pharmaceutical industry. We also have greater opportunities in manufacturing in the industrial sector through the acquisition of Jake Marshall. We expect there to be a steady increase in activity alongside the onshoring of manufacturing investment. In the near term, tight supply chains appear to be driving more building owners to devote capital to maintaining the uptime of existing assets. That's positive for our ODR business, especially with our T&M work, which is small but growing part of our business. We realized a 46.8% improvement over the same quarter last year with these T&M services and expect that trend to continue while supply chain issues delay equipment replacement. While we've been impacted by supply chain-driven equipment delays, these high-margin T&M services offset some of the equipment delay impacts. As I've stated in the past, our services are essential; humans need what we do: heat, air conditioning, water, power, and building automation that control the environments we create. We have built a diverse business allowing us to shift assets to where the opportunities exist, from sectors to geographies. We move where the business opportunities are present. The pandemic response back in 2020 and how we executed is a great proof of that. Finally, we continue to evolve. We keep evolving the business which has supported the hard 20 plus years of operation, and right now we're indicating that through our ODR transformation as well as the digital strategy. In the context of all these trends of how we operate the business, Limbach is well positioned and we expect to see improving operating results. With that, I'll hand it over to Jayme.

Thanks, Charlie. Our earnings press release and our Form 10-Q contain a detailed review of our financials. With that in mind, I will focus my discussion on key areas. I’ll start with gross margins. For the first quarter, ODR gross margin was 23.3%, and GCR gross margin was 11.6%, for a consolidated gross margin of 16%. This compared to 15.2% in Q1 of last year and 20.1% in Q4 of 2021. As we noted on our last call, the consolidated gross margin for Q4 benefited from an ideal mix of job cycle timing and the positive impact from a disputed claim settlement. The GCR margin of 11.6% in Q1 increased 50 basis points year-over-year due to generally improving execution. The GCR margin was solidly in the middle of the 11% to 12% range that we talked about on the Q4 call as being appropriate for modeling long-term. The ODR gross margin will fluctuate based on the mix of services provided in any given period. For example, project work is delivered at a lower gross profit percentage compared to T&M work. So the relative mix of work will impact the gross profit percentage in any given quarter. That was the case this quarter, which is why the ODR gross margin was below the long-term range of being between 25% to 28%. Our SG&A expense for the quarter was $18.7 million; first quarter SG&A was approximately level with the fourth quarter and increased $1.6 million from the prior year quarter. Similar to the fourth quarter, the high SG&A level was due to an overall normalization of operations compared with a prior year that was impacted by COVID. In addition, we incurred a full quarter of Jake Marshall SG&A expense this quarter, as well as certain expenses related to the restructuring of several business units. During the quarter, the continued assessment of our operational expenses identified several areas to target for cost reduction. These include further centralization of certain services, a reduction in our real estate footprint, and an evaluation of areas where we believe we can further streamline certain corporate management services. For the full year, we expect to incur approximately $45 million of costs related to several improvement initiatives, which includes the wind-down of our Southern California operation and the GCR business segment in our eastern Pennsylvania branch as well as other non-recurring costs associated with these cost-saving initiatives. These costs will be included in the addback of adjusted EBITDA and those incurred for the first quarter are in the adjusted EBITDA reconciliation table, which is found in our earnings release. A significant portion of these non-recurring expenses will run through SG&A. To cite one cost savings example, we have been assessing our real estate needs in light of flexible remote work schedules. We have focused on markets where we can reduce our footprint and are actively taking steps to right-size those spaces. During the quarter, we determined the lease of our corporate office in Pittsburgh to be combined with our operational office. The total cash and non-cash termination expense for the quarter was approximately $0.8 million, but this will save us just under $0.5 million per year of lease expense going forward. These expected cost savings and the addbacks to EBITDA are reflected in the guidance Charlie presented earlier. We currently have other cost reduction initiatives in play and expect to see further cost savings from these initiatives during the year, but will not realize a full year effect of those reductions until 2023. As such, we believe using Q1 as a quarterly run rate for SG&A should be reasonable. There will be some fluctuation over the full year as we incur these one-time related costs for our cost reduction initiatives, as well as realizing the long-term impact of those cost savings. Turning to the balance sheet and cash flow, at March 31, our balance sheet continued to be strong. We ended the quarter with cash of $18.1 million and had outstanding debt, including the short-term portion of $47.7 million. The senior leveraged ratio continued to be under two times our adjusted EBITDA. Our net underbilled position declined to $13.3 million from December 31 to $7.9 million, and we are confident that the significant reduction in our underbilled position shows that we are making progress working towards a neutral billing position. As we do so, we expect working capital to be positively impacted in the long term. We consumed $3 million of cash from operating activities during the first quarter, which was a dramatic improvement from the first quarter a year ago when we used $17.4 million of cash. During the first quarter, if we start with the net loss, add back primary non-cash operating activities of $4.7 million, and then subtract $200,000 for capital expenditures during the quarter, the business generated $3 million of cash flow before taking working capital changes into account. As we suggested in Q4, this is a reasonable way to view cash generated from the operation of the business. Based on the projected earnings this year less capital expenditures, we expect positive cash generation from the business in 2022 before working capital changes and our debt amortization payments. I want to emphasize the nature of our business is such that working capital will fluctuate in the short term due to project timing among other things. Over time, we do expect working capital to have a modestly positive impact on the business as we shift our model to ODR work and smaller projects. I'll now pass the call to Mike.

Thanks, Jayme. Good morning. Continuing with Charlie's earlier comments about market activity, we see two primary themes in the market. The first is short-term repair work and retrofit work. Our customers are well aware of the current supply chain issues, so they know they simply can't afford to have their equipment fail. Due to that fact, we've been focused on direct billing owner relationships, and we are in a good position to capitalize on this lack of optionality in our trusted relationships. The second is that our customers are starting to realize that deferred capital expenditures on building systems infrastructure that accrued during the pandemic cannot continue. At some point, existing systems cannot be repaired any further; it needs to be replaced. Given the overall strength and demand in the market, building owners know they are effectively competing with each other to lock down commitments for scarce capital equipment. The net result for us is an active sales pipeline; we're seeing both increased backlog from larger infrastructure projects and quick-hitting revenue from repairs and maintenance. Of note, first quarter product sales were up 74.4% from last year's first quarter, which was really great to see. At March 31, the ODR segment backlog was $106.9 million, up from $52.9 million a year ago, a 102% increase. Additionally, ODR backlog grew sequentially by 9.1%, which reflects a continuing focus on consistent sales activity. We think we're well positioned to deliver solid year-on-year growth in ODR revenue in 2022. For the full year, we expect to see ODR account for an increasing portion of overall revenues as we track towards our 2025 goal of a 50:50 segment revenue split. Recall that in 2021, the ODR segment contributed 28.6% of revenues, up from 22.4% in the prior year. So we feel good about the overall trend. We expect the percentage split in 2022 to be in the range of 32% to 37%. While our backlog has benefited from an active sales pipeline, I also want to note that due to supply chain delays, that backlog is taking more time than normal to convert to revenue. That is a primary driver behind our second half-weighted outlook for the year. But we have the business in hand and we can see good evidence of our strategy becoming reality. Our local branches are continuing to look to maximize the return on the resources that have naturally driven them towards ODR revenue and its comparatively attractive margins. There is ample demand for those small projects across many of our market segments in many of our branches. The first quarter GCR segment margin was 11.6%, up from 11.1% a year ago, keeping with our emphasis that longer time periods offer the best lens with which to evaluate our business. The trailing 12-month segment gross margin is 13.2% compared with 10.5% at this time a year ago, when we merge these two themes of ODR expansion and improved GCR execution. We have confidence we’re going to continue to deliver growth in revenue and generate improved bottom-line contributions. The ODR sales momentum and market demand will continue to drive the company closer to our goal of a 50:50 ODR to GCR revenue mix. Let me hand this over to Charlie for comments on our acquisition activities and then wrap up for Q&A.

Thanks, Mike. Let me move on to Jake Marshall and how that's going. The integration is proceeding well, and it's on schedule, which is a testament to the focus and determination of everyone involved inside both organizations. The partnership gets stronger every day and we continue to find new ways to work together as one company. We've really only just started to exploit the potential sales, marketing, and operational opportunities. The Jake Marshall leadership team has also been invaluable from a perspective of offering advice on industrial markets and fabrication capabilities. So a special thanks to the team at Chattanooga and our colleagues at Limbach. It's been a great team effort. The industrial and institutional markets continue to strengthen in the Tennessee region. As we've seen elsewhere, Jake Marshall backlog conversion to revenue has experienced a lot of shifts to the right, mostly on one larger project. But we're seeing quick replenishment of the sales pipeline overall and a steadily growing base of bread and butter industrial maintenance activity. There's a lot of upside in those markets, and over the next several years, we expect that we have the right team to capture it. We'd love to find a local and regional tuck-in acquisition-type opportunity for both product and service providers to further expand Jake Marshall’s capabilities, and we'll see what the market has to offer. We continue to evaluate a steady stream of acquisition opportunities of locally dominant privately owned businesses. As we've said before, we're discriminating buyers, and I don't think that's materially impacted the opportunity set. If we're going to spend capital, we want to do it thoughtfully and with maximum impact. While we like to get more than one deal done this year from a planning perspective, ultimate target company quality will be a key determinant of our success there. As we noted earlier, we feel good about the continuing improvement and consistency of our overall execution. Our ODR transition has us well positioned to benefit from current market dynamics, as evidenced by growth in project sales of over 74% from last year, as Mike noted. ODR backlog was up significantly from last year and improved 9.1% from Q4 of ‘21. So we are certainly feeling great that there's terrific momentum in the business. You've also heard us talk about a 50:50 segment revenue split for some time, and that continues to be our goal. We're focused on organic growth efforts on the ODR model and also continuing to hunt for acquisitions that include significant ODR components. In ODR, we continue to expect to realize gross profit margins in the 25% to 28% range. Just to be clear, that range is what we expect to see over the long term. In any given quarter, we may see margins move above or below that range due to timing of our workflows. In GCR, we are emphasizing gross profit dollars from allocating resources to that segment where we have proven execution, and we expect to realize GCR gross margin in the 11% to 12% range. As we continue to see ODR contribute a greater portion of our revenues with a 50:50 split, we also expect to see an upward bias in our gross margins. As Jayme commented, we are working aggressively to achieve and maintain our SG&A right size. Over the long term, we expect SG&A to run at approximately 13% to 13.5% of revenue, which reflects the combination of efficiencies and operating leverage from scaling up the business to the 50:50 split. In terms of M&A assumptions embedded in our goals, we see plenty of opportunities available to us. From an operational perspective, we feel good about our ability to integrate anywhere from one to three acquisitions per year. As our integration of Jake Marshall demonstrates, our branch-based model facilitates the bolting of acquired businesses without any disruption to our other operating units while concurrently allowing for a two-way exchange of best practices. One last point I'd like to reiterate is that we're optimistic and confident about the business. Each one of us on the call here today, along with several board members and other executives made open market stock purchases early in the second quarter, and many of us did as well throughout 2021. We are firmly committed to executing our strategy and delivering on our financial growth targets. With that, we'll take your questions.

[Operator Instructions] Our first question comes from Rob Brown with Lake Street Capital.

Hi, good morning. I wonder if you can comment a little further on the service shift in terms of what you're seeing as maybe some equipment delays flow through and how you're seeing that return service business ramping and how do you sort of see that playing out throughout the year-over-year?

Thanks, Rob, for the question. One of the things that we've definitely seen a significant shift, I think, especially from an internal perspective, we're really trying to make sure that from a capital allocation, we're allocating to the highest gross profit opportunity. That's kind of led our business towards increasing resources to the owner-direct side. We're seeing really two different things from a market perspective: short-term, quick-hitting T&M work built from our maintenance base that continues to increase; at the same time, from a larger project capital spend perspective, I think with rising energy prices and inflation, it's kind of led to our strategy as well, too, because larger construction projects have taken longer. They're worried about inflationary costs, which has potentially pushed building owners to think about the capital expenditure and infrastructure projects, which has really helped us from that perspective.

I also think you have the whole energy and utility jump in expenses causing owners to seek the opportunity for energy retrofits. So Rob, we're pretty excited about that. I mean, we have the customer relationships, now we'll be able to leverage that as customers think about improvement to facility cost reduction with utility costs finally. So we think it's an excellent opportunity for us to take advantage of that.

Okay, great, thank you. And then maybe just the SG&A cost, you talked a lot about some of the efforts to improve there and get some leverage. Do you see getting leverage in the SG&A cost this year over last year? Or is that more of a 2023 trend line?

That's going to be more long-term. They are agreeing to terms talking about the 13% to 13.5% as a long-term range as we get closer to the 50:50 split. That will be realizing partial savings this year as we actually realize the cost savings within the full-year impact; it won't be until 2023.

Rob, it's a major focus. I mean, we did step back over the past quarter and take a very hard look at how we're deploying SG&A. I think we've made some great moves both in terms of some reduction in personnel at the center, as well as looking at just how we're deploying those SG&A dollars. I'm just going to reinforce we're shifting GCR dollars over to ODR. We're just getting much better returns as our numbers demonstrate. I think there's a very smart focus on leveraging that with a 13% to 13.5%. Long term, I'd actually refer to it as maybe mid-term that we'll get there. But it's definitely actively being acted upon.

Our next question comes from Chip Moore with EF Hutton.

Hi, good morning. Thanks for taking the question. Good morning. Wanted to maybe just first if you can expand a little bit on revenue visibility for the year. How do we think about handicapping some of the risks whether it is supply chain or the macro concerns that you touched on in the back half of the year, look like at least backlog coverage is something like 80%. So very good, but and leading indicators are good, but just want to handicap some of those potential risks in the back half.

The backlog coverage for both our segments at this point of the year is fairly strong. So we're really happy with what we see. What I will share with you is the sales, especially in the ODR side of the equation are really up year-on-year and you heard those percentages of backlog about 2% year-on-year. But I'll comment, the month of April just continued to see very short sales on the ODR front, actually improved over what we saw in the first three months of the year. So it's really good to see that our strategy around ODR is taking off. So backlog right now we are sitting fairly strong. We're satisfied with where we stand today for the year tied back to the guidance I provided, but also sales, especially on the ODR front, continue to remain extremely strong.

That's helpful, Charlie, and maybe for my follow-up. More so on Jake Marshall specifically, it looks like things are going very well there. I think you talked about maybe adding, looking to add some resources there. Just give us an update on the end market. I know I believe the major automotive OEM, I think is an existing customer that's talking about building a new production site and a new battery plant in the Chattanooga area, just maybe some more end market insight from Jake Marshall.

Yes. So the Tennessee market is actually on fire right now, similar to public health markets. We're very, very busy. What's happening with the manufacturing center at Tennessee, we're thrilled that we did this deal. I think the owner that sold to us is thrilled too and he's working in partnership with us. He actually attended our senior management conference recently and offered a lot of insights on how he thinks he can help Limbach, which I thought was great to hear him say. Going back to the particular market conditions down there, first of all, Jake Marshall is in very good shape backlog-wise. They are exceeding our expectations for the year already. When you take into account what's happening with Ford and the battery plants, those are multiple billions of opportunities to us. We’ve had conversations with those customers. Right now, we're going to be very careful about labor and supply to make sure we don't oversell our capacity to deliver. But right now, they're in great shape. When you have those types of market dynamics, supply and demand curves are clearly in our favor. You can see the improvement to margins happening in the future as that market continues to throw out so much opportunity to us. We're very pleased with how things are going down there in the manufacturing and industrial side. We're pretty pumped up about it. It’s not only about Tennessee but exporting their knowledge on manufacturing and industrial mainly in our Midwest markets. There's a lot of opportunity right now in the Ohio and Michigan markets that Jake Marshall will be helping us on, especially with prefabrication and modular components.

Our next question comes from Gerry Sweeney with ROTH Capital.

Hey, good morning, Charlie. Jayme and Mike, thanks for taking my call. I wanted to stay on the ODR topic. Obviously, it's a focus of yours but I want to see if you could give us maybe a little detail or thoughts on how you're going to market with that strategy and what the competitive environment looks like and how you are differentiating yourselves from some of the competition or then the final, this is a long question. I apologize and maybe even if some regions are better suited for the business today as opposed to other areas and how you can develop those areas. So I apologize for the long question, a lot to unpack there, but I think it's important.

Gerry, I wrote down I think the ultimate components of that question. If I miss something, just ask, I might be missing a point. No, but it's great. So yes, absolutely. Number one, we put more feet on the street over the past number of years. That's allowed us to go into buildings where we didn't have a presence and with new customers that were really targeted on account management, looking for those ODR relationships where it's not just one building but multiple buildings. So that's going really, really well. Number two, a station of what I call wallet share. We have over 1,200 owner-direct relationships. What we're looking to do is determine what else we can do for them. We have our traditional core service offerings, but now we're exploring opportunities to act as what we call NEP prime, where if there's essentially a utility upgrade, you really don't need a general contractor; we can do that for you because it's minor in nature concerning steel or drywall, where we're more focused on mechanical, electrical, plumbing, and building automation. They love that. So we're having great success at sharing those concepts with owners and they're buying in. Finally, we're also expanding products and services that we can offer to the customer. We are working aggressively on our digital transformation. We talked about this in the past: predictive analytics, digital asset management. There are a lot of different things we can provide. And I'll take one step further. We recently had a management off-site, and we brainstormed. We have all these relationships. What else can we sell them? So we started talking about different things that we do today in our business extremely well. I've put this out there: something like safety; we are experts at safety in so many regards. We are the leaders in the industry; why can't we export some of those services to a building owner that needs additional safety coverage? There are also things like program management that we started in Nashville last year that has gone extremely well with our healthcare customers, can we start offering those program management services to other types of market sectors. So there's a host of things we're doing to expand what I call wallet share. But we're working on the street, grabbing more market share and selling additional products and services. So all of that is going to continue to accumulate to the rapid growth of the ODR segment.

When you talk about more feet on the street, is this a sale directly to the building manager? Or is there an opportunity to sell to building owners, especially if they own a portfolio of buildings?

Yes, both, Gerry. We really target getting into the C-suite, if that's an option for us to work hard to figure out how we get to the key decision-makers. But sometimes, it's the facilities engineer. I just heard a story last night: one of our employees was having dinner at a restaurant in Clearwater, Florida. They overheard at the next table, somebody talking about our company, and she couldn't help herself and get over there and have a conversation with the individual. She introduced herself as an employee of the company. What she overheard, turns out he was the facilities director of a major resort where we're doing some big work directly for the owner. He was singing our praises, and we circulated that email to our key managers for business lessons that was just a great story. The point I'm making here is we're working at all levels, whether it's a facilities director or getting into the C-suite. I made a comment a moment ago; we're looking to really latch on to customers that have multiple building facilities, not just one-off opportunities. All of that is going to continue to roll out to rapidly grow the ODR segment.

Are there areas within your footprint that ODR is better positioned for growth, and then certain other areas that maybe you have to make some investment in? Just curious, are you just seeing broad, across-the-board type of growth?

Gerry, one of the areas that we're really seeing that would be a vertical market sector; we've looked at all of our local businesses, and I think from a national approach, that focus on healthcare, healthcare is one of the sectors. I think from one of our competitive advantages is we're able to offer our full suite of services in a connected approach. There’s that multiple people not showing up to sell controls or maintenance or projects. I think we look at that healthcare sector and there are a lot of other mission-critical sectors that we look at as well, but we're looking at those where we can offer those services where it's mission-critical, where the need is as important, maybe even more important than price. I think from an even bigger picture approach, we want to be in the building; we want to be doing the smaller work. When we're there and we're connected, we have that trusted relationship. If there's a larger project that comes along, and maybe it's in the GCR sector, then we're embedded in that facility and we can capitalize, so we're looking for mission-critical types like healthcare and other vertical market sectors, and healthcare, luckily, is really a sector in all of our branches where we can offer those services and be there for the life of the building. Especially as that facility grows, we’re there and we're trusted.

Got it, that's really helpful, especially the mission-critical and pricing being a secondary sort of notion on some of that business you're looking for. So I'll jump back into it, but I appreciate it. This has been helpful on the ODR side.

Our next question comes from Jon Old with Long Meadow Investors.

Good morning, everyone. Thanks for the questions. Yes, first question. For Jayme, real quick, just sort of a follow-up on the expense savings. So you talked about one specific example and the lease costs. But if you're looking at going into ‘23, what do you think the total overall run rate dollar savings could be as we head into the following year?

Yes, we haven't specifically called out what ‘23 is going to look like; it's basically from that timing of the real estate is really probably the most tricky piece to factor in because we're looking to do sub-leases or terminations to get out of some leased space. That's why we kind of put out more of the guidance of the long-term outlook for where SG&A could land when we get to that 50:50 split.

Okay. All right. I mean, you just mentioned $0.5 million for your leases; you don't have the total number for all the areas you're looking at.

Yes, we're still working through that.

Jon, we're actively marketing several of our properties for either sublease or various transactions. We did a really great job out in Southern California, Jon, with getting rid of that property. That was a really good outcome. Then the Pittsburgh move, which we just made was also terrific. I'm very, very pleased. The other properties that are on the market, we're seeing interest, and we're working with a group that I think has just done a terrific job at marketing the property. That's going to help us but, Jon, just to be clear, the sale is going beyond real estate, right? That's just a very smart play. But we're looking at other aspects of cost reduction, and we've got a healthy list, and we're checking them off. I'm excited about the progress.

Right. But your margin target is 2025. That's not before that.

Yes, 13% to 13.5%.

Yes.

Yes. We're working towards those numbers aggressively.

Then, yes, and another question. I mean, I noticed, obviously, the use of the revolver is reflected in the balance sheet. The average balance for the 10-Q was virtually nothing; it was like 0.1. So obviously, you used it right at the end of the quarter, or is it still in place or you’ve since paid that down.

We've since paid that down. Also, just an item to point out too, as well on our term debt. We have a payment that came due for an active cash flow payment, as well as we have some clear claim recovery. Per agreements, we need to pay down our term debt with that, and that was about $5.5 million that actually took place here at the end of April. You'll see that come down from the term debt here, but we went post Q2, but that's where we look to leverage our revolver so that we can borrow it back based on the revolver; that way, we are only borrowing it when we're covering off different needs of cash.

Yes, okay, good. And then obviously, the GCR segment is declining, and that's planned. But do you see that leveling off at some point this year? Or is that just going to continue to sort of, I know as a percentage it's going to go down, hopefully, as ODR grows rapidly. But at some point, does it organically sort of stop going down and stay flat or grow modestly?

Jon, thanks for that. Yes, we expect that to be flat plus or minus a few basis points. I think we're really focused on getting the best return from a gross profit perspective and allocating our resources accordingly. That may tend to drive each individual opportunity to the higher gross profit. More or less, we're looking to be relatively flat.

Jon, the discipline we put into the business, sales was interesting from the past couple of months. We had some interesting opportunities that we were pursuing. We were getting what's referred to as last book; will you take it for this price? We said absolutely no. I'm so happy we did that because it's the right decision. One, our backlog is strong to begin with, we're in good shape. But we're rolling firm; we're all about creating more bottom line off the key star side. We see the right opportunities in our markets that execute and perform well, we'll take that business on, but where we see margins low, we're going to wait and deploy over to ODR. It makes perfect sense; we got to maximize the total bill, human capital assets that we have. That's the focus.

Our next question comes from George Melas with MKH Management.

Thank you. Thanks for taking my question. I have a question on ODR; you gave us certain long-term gross margin. So the range for the business of ‘25 through ‘28. But given the fact that the business right now is quite big, this quarter was $43 million. I'm very puzzled by the quarter-to-quarter fluctuation in the gross margin. I mean, at some point last year it was 29%, now it's 23%. Can you help me understand why business of that size that has so many small projects has that much fluctuation in gross margin?

It's sometimes it is project timing because some of the projects are larger in scale. George, you might have a project that's moving along where the larger projects' margins are going to be smaller, just the nature of some of those deals. The majority of what we do, though, are the smaller projects that are very high-margin, but it's a timing issue. We saw Q4, right? There was a terrific quarter; the first quarter saw some big work going through the books. We expect to see some write-ups as work wraps up, but that happens in the future course. The fluctuation over quarter will be there, but the general trend should be in the 25% to 28% range. I've been saying that for quite some time.

But was there any special payments or special cost in the past few quarters, and in this quarter that explained that fluctuation?

No, not really. Mike, do you have any further comments on it?

No, I would just like you said, it's based on project mix and lifecycle, depending on the multiple sources of owner-direct revenue, from small projects to maintenance to larger projects, all depends on the mix in a particular quarter.

George, I know we live on a quarter-to-quarter basis, right? We'll get that. But there's going to be some fluctuations each quarter. We've been demonstrating now for several years, but the good news is the overall trend continues to show upward movement, which is just great to see. That's what we had expected.

So if you look at the $43 million this quarter, how many projects is that coming from?

Oh, my goodness, there's hundreds of small projects. Some of the projects are only $10,000, George; it's a small in-and-out business.

Right. So what would be the biggest projects that you recognize revenue in this quarter?

There's some work we're doing for the TDA, which are large scale projects. That's on the lower end; we have some other projects out there that are probably in the $2 million to $3 million range that might be on the lower end, 15%, 18%, 20%, that type of range. Those projects are burning, and maybe some of the smaller projects are pushed quick that could impact, say normally down to the 23% number that you just saw in our numbers this particular period. We do expect again, that range of 25% to 28%. That's the way people should be modeling our business.

There are no further questions at this time. I'll turn it back to management for closing remarks.

All right. I want to thank everybody for joining us today. All of us here at the company, the board of directors, our senior management, and many of our shareholders are excited about our strategic direction and what that means for our future. We have established the proper foundation of practices for growth in both our top line and bottom line with a continuing track record of execution, and we have a terrific trajectory. We firmly believe we are undervalued; our peers are trading at multiples more than twice our current multiple. As we continue to execute our plan, we expect that gap to narrow. There is incredible value here and that's why a number of insiders have continued to buy our shares. We look forward to speaking to you again when we report our second quarter results in August. If you have any additional questions, please reach out to Matt Katz, who will be back on the saddle later today, or our Investor Relations for the equity group. Their contact information will be found on our investor page on our website. Again, thank you for your interest in Limbach.

Thank you. That concludes today's conference. All parties may disconnect. Have a good day.