Good morning, and welcome to the Q3 2024 Limbach Holdings Earnings Conference Call and Webcast. All participants will be in listen-only mode. I will now turn the conference over to your host, Julie Kegley of Financial Profiles. You may now begin.

Good morning, and thank you for joining us today to discuss Limbach Holdings Financial Results for Q3 2024. Yesterday, Limbach issued its earnings release and filed its Form 10-Q for the period ended September 30, 2024. Both documents, as well as an updated investor presentation, are available on the Investor Relations section of the company's website. 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 Mike 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 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 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 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 will now turn the call over to President and CEO, Mike McCann.

Good morning, and welcome to our stockholders, analysts, and interested investors. We appreciate you joining us today. Execution has been the key to our success. This was evident in our third-quarter results, with each part of our three-pillar strategy contributing to our strong financial performance for Q3. Our strategy involves shifting revenue to owner-direct relationships, evolving our offerings, and scaling the business through acquisitions that led to EBITDA growth and margin expansion. We're proud of what we have achieved. We continue to have opportunities to grow organically, to add high-margin offerings, and to make acquisitions that expand our footprint while deepening our customer relationships. The first pillar of our strategy is our shift to owner-direct relationships. Year-to-date, 67% of our revenue and 77% of our gross profit come from owner-direct relationships. We continue to be on target to reach 65% to 70% of revenue from these relationships for fiscal year 2024. Our second pillar focuses on evolving our offerings and margin expansion, which positively impacts not only our organic growth but also the profitability of the companies we acquire. Our three-year strategy to evolve our offerings is well underway. In 2024, our focus has been on offerings that complement the operational budgets of building owners, including on-demand services, critical system repairs, data-driven solutions, and general maintenance and operations. To do this, we've invested in account managers who gain a deep knowledge of our customers' facilities, allowing us to immediately react to our customers' needs. Understanding these facilities gives us the opportunity to proactively work with our customers to develop their long-term capital plans. Assisting our customers with their long-term capital planning is our focus going into 2025. We will strive to create additional value by providing MEP Capital Project Solutions, along with equipment upgrades and professional consulting services. Another offering investment we made in the first half of the year was $4 million in rental equipment for indoor climate control, specifically air-cooled chillers and air handling units to support our customers' needs. We see an opportunity to grow this offering due to the demand for large temporary-use air chillers. Over the next 12 months, we plan to invest an additional $4 million to purchase more equipment and add personnel. This is a scalable offering with high returns on invested capital. Our third pillar is scaling through acquisitions. We're creating value through acquisitions by acquiring businesses for single-digit EBITDA multiples, even before taking into account the synergies we expect to achieve through both sales mix shift and scale. With four acquisitions completed, we expect to maintain a more even deal flow and also be opportunistic when looking at potential transactions that could expand our offerings or include larger businesses. While our pipeline for acquisition activity is robust, we are disciplined in our rigorous diligence process, carefully analyzing the cultural compatibility between our organization and the target companies. We want the right fit at the right price. Our acquisition in early September of Kent Island Mechanical is a great example of how a tuck-in acquisition complements our organic growth and creates value for our stockholders. As soon as we closed the deal, we began integrating Kent Island into our local operation and the Limbach platform. Within weeks of the announcement, our local leaders from both companies had met with all our key customers in the Washington D.C. metro area. By combining the capabilities of Kent Island and our local Limbach office, we strengthened our relationship with our key owner accounts in that market. For example, one key account is a joint healthcare customer. Kent Island's relationship was with the hospital staff who procured the larger capital project, while our branch relationship rested with the Facility Director. We are proactive in getting in front of that customer and positioning Limbach as their total solutions provider, and as a result, we were able to pick up market share. This process is repeatable in many of the markets we serve. Including contingent earn-outs, we paid approximately five times the 2025 projected EBITDA for the Kent Island business. Post-deal close, we believe we have created a value creation process that we've perfected over the past several transactions. Our long-term objective is to buy companies at a very accretive valuation and over a three-year period increase the profitability of that asset. Our value creation process is built around establishing a common operating and strategic platform across all our locations. After a three-year period post-acquisition, we want the acquired entity to be performing and operating similarly to our organic location. Initially, we apply lessons learned from a risk management perspective and benchmark their gross profit against what we see with our other business locations. Our model focuses on each location, concentrating on their local niche and passing on work that falls outside of their vertical markets. Our go-to-market strategy is built around expanding relationships with customers in industries that have mission-critical infrastructure. Many businesses we look at have divisional models with several P&L departments acting independently. In deals we've completed, we quickly realize the best way to unlock value with these new organizations is to recruit or hire a sales manager who coordinates the sales effort to unify the divisions. This role determines and researches what accounts we deploy our on-site account managers. These account managers are assigned to the top five accounts of the newly acquired company, gaining detailed knowledge of the facilities and becoming the go-to problem-solvers for building owners. Over time, as we dedicate these resources, we find our customers provide additional revenue opportunities. Our goal is to offer bundled solutions that combine our capabilities. One example is a healthcare customer in the Boston area. Over the past two years, we have expanded our relationship by performing various maintenance and project services. Recently, we signed this customer to a bundled service contract that goes beyond traditional maintenance to include engineering services for capital planning, maintenance for several systems, staff augmentation, and proactive analysis. Over the next 12 months, we anticipate creating more bundled offerings like this with additional customers. We believe our customer relationships can scale broader. We believe we can transition our local relationships into national customers, and we're starting to see some progress on this initiative. Two customers have asked us to expand our reach, one in the data center vertical and the other in healthcare. Our local presence, combined with a common strategic platform, will enable us to support these customers in multiple locations. Our suite of professional services, coupled with our acquisition program, allows us over time to become an enterprise solutions provider for these national customers. Turning to our outlook. Based on our strong performance for the first nine months of the year, we now expect total revenue to be in the range of $520 million to $540 million, compared to our previous guidance of $515 million to $535 million. Adjusted EBITDA is now expected to be in a range of $60 million to $63 million, up from $55 million to $58 million. We expect full-year gross margin to be 26% to 27%, compared to previous estimates of 24% to 26%. Jayme and I have had many investors ask us this year about our growth rate going forward. We haven't provided long-term guidance, because we've been in a state of transition as we've moved away from general contract relationships toward owner-direct business. In 2024, we've made tremendous progress with this mix shift. We've also transformed how we go to market through account manager-based sales and customer engagement, focusing on the top customers in each market. We'd like to establish a track record with this new model before we provide more specific guidance on anticipated future growth rates. What I can tell you is that we believe, over time, we can expand overall gross margins similar to other building system solutions firms while growing consolidated revenue. The consolidated revenue growth is a combination of organic growth and acquisitions, and we expect to see top-line revenue growth starting in 2025. I'd now like to turn the call over to Jayme for our financial report.

Thank you, Mike. Our third quarter 2024 earnings press release and Form 10-Q, which provide comprehensive details of our financial results, were filed yesterday and can be found on our website. I will focus on the highlights from the third quarter. All comparisons are third quarter 2024 versus third quarter 2023, unless otherwise noted. During the quarter, we delivered total revenue of $133.9 million, representing 4.8% growth from $127.8 million. ODR revenue grew 41.3% to $93 million, while GCR revenue declined 33.9% to $40.9 million. The decline in GCR revenue reflects our intentional selection of higher quality, shorter duration projects. ODR revenue was 69.4% of total revenue, up from 51.5%, while GCR revenue was 30.6%, down from 48.5%. As Mike stated, we are executing our mix-shift strategy and are on track with a target of 65% to 70% of revenue coming from our ODR for 2024. The increase in ODR revenue is driving our gross profit and adjusted EBITDA results. Our ODR backlog at quarter end was $209.8 million compared to $147 million at December 31, 2023. GCR backlog was $161.5 million compared to $186.9 million at December 31, 2023. The increase in ODR backlog and the decrease in the GCR backlog reflect our continued focus on accelerating the growth of our higher-margin ODR business. Please keep in mind that the backlog in the ODR segment does not reflect our complete book of business; many ODR projects are short-term in nature and can be sold and executed before becoming part of the backlog at the end of the quarter. Total gross profit increased 15.6% to $36.1 million from $31.2 million, reflecting our emphasis on ODR. ODR gross profit comprised 82.1% of the total gross profit dollars or $29.6 million. ODR gross profit increased $10.4 million or 53.8%, driven by higher revenue and expanded gross margins of 31.9% versus 29.3%. GCR gross profit decreased $5.5 million or 46% as a result of lower margins and our focus on mix shift and selectivity on GCR projects. Total gross margin increased to 27%, up from 24.5%, mainly driven by the mix of higher margin ODR revenue, continuing to be selective when pursuing GCR work, and the impact of acquisitions. SG&A expenses increased approximately $2.8 million to $23.7 million from $21 million. As a percentage of revenue, SG&A expenses were 17.7%, up from 16.4%. The increase in SG&A expenses was primarily driven by a $1 million increase in SG&A costs from Industrial Air, as they were not part of the company during the prior-year quarter, along with a $1.1 million increase in payroll-related expenses, a $0.5 million increase in stock-based compensation expense, and a $0.4 million increase in professional services fees. For 2024, we are still targeting SG&A expense as a percentage of total revenue to be around 18% to 19% as we continue to invest in the ODR business to drive growth. Net income was $7.5 million, an increase of 4.1% from $7.2 million in 2023. Diluted earnings per share was $0.62 compared to $0.61 in the same quarter last year. Adjusted EBITDA for Q3 was $17.3 million, up 27.2% from $13.6 million, and the adjusted EBITDA margin was 12.9%, up 227 basis points from 10.7%. Turning to cash flow, we had $4.9 million of cash flow from operating activities compared to $17.2 million. This difference was primarily driven by the timing of changes in working capital. Cash flow from investing activities reflects the $12.7 million net purchase of Kent Island and capital expenditures of about $351,000. Free cash flow for the quarter was $13 million compared to $11.2 million, an increase of 16.6%, which we define as cash flow from operations minus changes in working capital and capital expenditures, excluding our investment in rental equipment, which was minimal in Q3. The free cash flow conversion of adjusted EBITDA was 75.3% in Q3 versus 82.1% in the same quarter last year. For 2024, we continue to target a free cash flow conversion rate of approximately 70%, excluding our investment in rental equipment. We invested $4 million earlier this year in rental equipment and plan to invest an additional $1 million by the end of this year. With the additional investment in rental equipment this year, we expect total CapEx for 2024 to be approximately $8 million, including the expected total investment in rental equipment for 2024 of $5 million and approximately $3 million in other CapEx related to the acceleration of our ODR strategy. Turning to our balance sheet, at the end of Q3, we had $51.2 million in cash and cash equivalents and $10 million borrowed on our revolving credit facility at a weighted average interest rate of 5.72%, reflecting our interest rate swap agreement. For the quarter, interest income exceeded interest expense. Our balance sheet remains strong, and we believe we are well-positioned to support investments and acquisitions that drive continued ODR revenue growth and margin expansion. In keeping with what we consider good housekeeping, capital planning, and governance, we took steps to file a universal shelf Form S-3 registration statement in connection with our quarter end, as our previously filed Form S-3 registration statement had expired due to its age. Our current liquidity position remains strong, and we currently have no plans or intentions to conduct any type of registration offering on this Form S-3. This is a routine action to ensure that we provide future funding optionality to the company should we need it in the future. That concludes our prepared remarks. I'll now ask the operator to begin Q&A.

Thank you. Our first question is from Rob Brown with Lake Street Capital. Please go ahead with your question.

Good morning, Rob. Yes, a couple of different ways. One is from a vertical market perspective. Our three verticals, just to touch upon the continued strong demand, are data centers, healthcare, and industrial manufacturing. Each of these continues to be strong. For us, it really comes down to our attention and focus on these accounts. We've spent a couple of years now really dedicating resources, both from a local and national level to connect our relationships. The other thing from an account-centric model that we have is building durable demand. We talked a bit today in the prepared remarks about our extreme focus and OpEx focus, ensuring that we have offerings that really match our overall company goals and drive us toward becoming a building systems solutions company. It’s really a combination of being on the mission-critical accounts where they have to make repairs, combined with vertical markets, and building durable demand.

Yes, and that's really the second pillar, which has really evolved offerings to drive margin. So, we still feel like we're very early on that. A lot of our margin pickup has really come from our mix shift. But we really have a three-year plan to introduce offerings that transition us from a typical E&C company toward a building systems solutions firm with durable demand and consistent customers.

And kind of moving to M&A to Kent Island, it looked like a pretty good acquisition on your strategy and you've done a number of these. How does the pipeline look? Should we expect more Kent Islands or look for maybe a different mix as you continue M&A?

So, Kent Island is our fourth deal since November of '21. Our goal and our ongoing goal is to ensure we're very careful and measured in our approach, learning from each deal. Our acquisition approach isn't just about adding on a number of companies; our goal is to integrate them from both a systems perspective and a strategic platform perspective. We've learned a lot over these four deals, and with every new one, we pick up insights. This is why we discussed our value creation model in detail today. We are looking for three things: cultural fit, niche capabilities, and a solid customer list. Cultural capability is tremendously important because changes will need to be made in collaboration with the acquired company. Our objective is how we can make one plus one equal three, four, or five. We've developed a robust pipeline and, through insights gained from these four deals, we want to apply those lessons moving forward. We aim for a more even deal flow and a steadier pace of acquisitions going forward.

Our next question is from the line of Gerry Sweeney with Roth Capital. Please proceed with your question.

A couple of questions, probably similar to Rob, but slightly different. On the growth side, how much is growth coming from existing customers versus finding new ones? I'll leave it there and follow up.

Yes, I'll use two different examples to categorize that. The short answer is that a lot of our growth is coming from existing customers. We see that in healthcare, where we’ve invested in a professional service office in Nashville to connect with decision-makers. At the same time, we have been working locally with several healthcare providers. It’s really a combination of a local and national approach. I also talked about our standard platform from an acquisition perspective. But what makes us special is our collaborative work on these accounts, relating to their needs. For example, we have a local presence that has influence at a higher level, which helps us to gain market share.

If you look at your top, say, 10 or 15 customers, how much market share or wallet share do you think you have with them? Or even say, what inning you're in with them in terms of penetration?

We're very early, I mean, maybe one or two innings at this point. We’ve been careful to narrow down our customer list to those with mission-critical systems. They can't afford downtime. For example, if a system fails on Saturday, they can't wait until Monday for a fix. The second criterion we look for is whether they have enough scale and are looking to invest back into their buildings. Most times, we end up with customers that have significant scale and opportunity, and we chip away at the local level.

Got it. If you could detail some of the evolved offerings you're looking at, obviously you have the rentals and chillers, but what else should we look for?

Yes, from a long-term outlook, we believe there are many opportunities for margin growth. We would love to reach a point where our margins align with those of our OEM-type companies. But this year has been focused on operational excellence. That's about diversifications like rentals and the on-site account managers. We're still developing our data-driven solutions to improve our maintenance offerings. Looking ahead to next year, we will explore equipment upgrades or products we can offer. We would also like to examine how we can incorporate energy and decarbonization into our offerings. Professional services is an area we're laying the groundwork for, including how we can combine these offerings to build capital plans over time. We remain optimistic about the opportunities that lie ahead.

I appreciate it. I’ll jump back in line. Thanks, guys.

Thank you. We will be participating in the UBS Global Industries and Transportation Conference on December 3 and December 4. If you'd like to arrange a meeting with us during the conference, please contact UBS conference organizers. Thank you all for joining us today and for your interest in Limbach. If you have any additional questions, please reach out to Julie Kegley at Financial Profiles. Thank you, and I hope you have a great holiday season.

Thank you. This will conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.