Greetings, and welcome to Limbach Holdings Q1 fiscal year 2021 earnings call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If you would like to ask a question, please press star one on your telephone keypad. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Jeremy Hellman of The Equity Group. Thank you. You may begin.
Thank you very much, and good morning, everyone. Earlier this morning, Limbach Holdings announced its first quarter 2021 results and filed its Form 10-Q for the fiscal quarter ending March 31st, 2021. 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 this call. Beginning with this year's first quarter, Limbach has updated the naming of its reportable segment financial results to more closely align with its evolving business model and relationships with building owners.
The two reportable segments are now General Contractor Relationships, which is referred to as GCR, and Owner Direct Relationships, or ODR. These segments align to the prior construction service segments respectively. A complete description of each reportable segment can be found in the 10-Q file this morning. This renaming of the reportable segments does not create any material differences when applied to prior periods. With that, I'll turn the call over to Charlie Bacon, the President and Chief Executive Officer of Limbach Holdings.
Good morning, everyone, and thanks for joining us. Joining me today is our CFO, Jayme Brooks, our COO, Mike McCann, and our Executive Vice President, Matt Katz. We have a winning growth plan underway that's focused on improving earnings and cash generation. Last year was an important year for us to deliver improved results and to accomplish certain strategic milestones, and we were successful in doing that. This year is about continuing those improvements and furthering the overall progress and growth of our owner direct strategy. We view the 2021 year as a transformational year for Limbach and one where we continue to drive value for our shareholders. Over the past 18 months-24 months, we've revamped our sales approach to focus on maximizing our returns on Limbach's proven and talented human capital.
We focused on securing projects that have smart risk profiles where we have clear opportunities to deliver improved gross margins. When we spoke with you a month and a half ago, we noted that business conditions look to be normalizing after a frustrating winter, and that trend has continued. The American Institute of Architects Billing Index continues to be a favorable indicator. The March ABI score was 55.6, up from 53.3 in the month prior. The AIA's other key measure, the new project inquiry score, jumped again to 66.9 from 61.2 a month ago. In both cases, scores above 50 indicate expansion. Another indicator is the Dodge Momentum Index, which hit a 12-year high in April. Healthcare and laboratory projects dominated their institutional planning sector, which we believe means more opportunities for Limbach in two of our major end markets.
The index report commented that this score is 50% higher on a year-over-year basis. These data points reinforce the strengthening economic backdrop within which we have the opportunity to accomplish the strategic goals we have for the company. Over the next few years, we intend to drive our business to a roughly 50/50 revenue split between GCR and ODR work, which will boost profitability. In the GCR segment, our focus is on smart growth, which we believe will lead to improved bottom-line profitability. The indices noted above show that more projects are coming online in the next six to 12 months. A healthy GCR opportunity pipeline enables us to be very selective as we determine which projects to pursue. In the ODR segment, we're working to prudently accelerate growth in order to drive that 50/50 revenue mix.
Again, as the data I referenced indicates, we're operating in a strong demand environment, which helps us accelerate growth in that business segment. To do that, we're focused on generating more revenue and margin from existing customer accounts through traditional service projects and from energy efficiency projects, such as installing new building technology systems and deploying our predictive analytics solution. Under the Biden administration, we expect to see Congress provide incentives for building owners to improve energy efficiency and sustainability. A recent report by Morgan Stanley analysts pegs this as an immense building cycle worth upwards of $350 billion in the U.S. and European markets. They expect enhanced building monitoring to be a significant driver of facility service work, adding as much as 30% to the overall service market. This is a great opportunity for Limbach.
Late in the quarter, we announced a further investment in the healthcare sector with opening of an office in Nashville, which is a hub for many large hospital chains. We believe full-time presence there helps us better service those customers and to further expand both our ODR and GCR segment healthcare revenues. Many of you have heard me reference opportunities in the emerging indoor agriculture area, which plays to our strengths in highly engineered air handling solutions, building automation, and ongoing maintenance. This is an end market which is rapidly expanding and evolving. Apparent that indoor agriculture is the future of farming, and we are well-positioned to be an integral part of its growth. We believe the sector is ideal for Limbach for several reasons. First, the building owners understand the importance of indoor air quality and humidity control and will budget for it accordingly.
Second, the size of the projects is in our sweet spot at $2 million-$7 million. Third, these facilities require ongoing maintenance. We expect to have as many as eight active indoor ag projects in the second half of this year. We are in the early innings of this opportunity, and we're building a strong resume. This furthers our core strategy to be diversified and move human capital resources into sectors that are attractive. We still expect this year to be more second-half weighted than has historically been the case in terms of revenue and profits. That's largely a function of the pause the industry experienced late last year into January and February. As we speak with you today, I describe the current conditions in our industry as healthy. The impact of COVID appears to be receding, project awards are moving towards a more normal activity state.
March seems to have been a tipping point for the return to some normalcy with our customer base. The customer delays in awarding certain ODR contracts did impact our expected ODR revenue in Q1 by approximately $7 million. The good news is we are seeing the customers pick up the pace of decision-making. Certain ODR maintenance and small projects can only be deferred for so long. Eventually, replacement equipment and upgrade projects must move forward. With the push to get people back into office buildings, educational facilities, and entertainment venues, we're seeing a dramatic pickup in momentum. We also accomplished an important refinancing in Q1 that did result in some non-recurring expense, which impacted our results. Going forward, the refinancing will dramatically reduce the interest expense and increase free cash flow, which Jayme will touch on. With that, I'll turn it over to Jayme.
Charlie. First quarter total revenue was down 18.3% to $113.3 million as compared to the prior year. That decline was primarily due to our intentional shift to a more rigorous project selection progress that emphasized risk mitigation, improved profitability, and aligning our volume with our construction talents. That shift resulted in GCR revenue declining 22.5% to $84.8 million. ODR segment revenue was essentially flat at $28.5 million, compared with $28.3 million last year. ODR segment revenue accounted for 25.2% of the total consolidated revenue. We did experience some COVID-related impact on sales in our ODR segment in the fourth quarter and into the beginning of the first quarter, which impacted our revenue. ODR sales in March were strong but booked too late to recognize as revenue in that quarter. Total gross margin was 16.2% in the first quarter, up from 13.1% last year.
Needless to say, we're happy to see that improvement, which is a function of two primary drivers. First, the increasing portion of our revenue coming from our higher margin ODR segment, second, solid execution in our GCR segment. This quarter, there were no net write-downs generated in the GCR segment, which is the cleanest quarter in two years. SG&A was $17.1 million in the quarter, up from $16.8 million last year. As we've noted previously, last year's SG&A was lower than we would normally expect as we made adjustments in 2020 due to the uncertainty of COVID's impact on the business. We expect line items like travel to normalize this year while we continue to invest in our owner direct strategy. With that said, we're going to have timing differences between quarters with respect to SG&A expense.
Annualizing Q1 is a reasonable indicator of where we expect to end up for the full year. Interest expense during the first quarter was $1.3 million, compared to $2.2 million a year ago. We completed the refinancing of our debt facilities at the end of February. The quarterly interest expense number reflects not only a lower interest rate, but also interest on a reduced debt level of $30 million, as well as reduced loan costs. Additionally, monthly scheduled principal payments of $500,000 started March 31st. These amortization payments and the lower interest rate and fees will drive down our total interest expense going forward. Starting in Q2, you should be able to model the interest expense related to the credit facility using the interest rate and the outstanding balance, along with the scheduled principal payments of $500,000 per month.
For the first quarter of 2021, adjusted EBITDA was $2.1 million, compared to $3.7 million for the same quarter last year. Also note that Q1 of 2020 had not yet felt the impact of the pandemic, and the first quarter is typically our weakest seasonality. Net loss for the quarter was $2.3 million or a loss of $0.25 per diluted share versus a loss of $52,000 or a loss of $0.01 per diluted share for Q1 2020. The one-time refinancing charge contributed $2 million to the loss, or approximately $0.15 per share. In terms of seasonality, the first quarter and the first half of the year have always been weaker than the second half of the year.
As Charlie noted, business activity is robust, and as projects continue to be booked, we expect to see a much more pronounced split in the second half of the year relative to what we've experienced in the past. Over the past several years, we've consistently reported approximately 52% of consolidated revenue in the second half. This year, we think that split will be at least three percentage points higher or more for the second half. We expect an even larger impact in terms of margin, as ODR makes up a larger portion of our mix in the second half. That naturally implies a similar distribution of our adjusted EBITDA. Total backlog on March 31st was $446.5 million, as compared to $444.4 million as of December 31st, 2020. On March 31st, GCR and ODR segment backlog accounted for $393.6 million and $52.9 million of the consolidated total, respectively.
Shifting to the balance sheet and the cash flow. Our current ratio on March 31st was 1.46, which compares to 1.33 as of December 31st, 2020. We had cash and cash equivalents of $37.2 million and $35.4 million of total debt. $8.5 million of total debt was classified as current, and $26.6 million net of issuance costs was classified as long-term. As I mentioned earlier, in February, we completed the refinancing of our senior credit facilities. The new credit facilities consist of $25 million of the revolving credit facility and a $30 million term loan. The rate on the term debt is LIBOR + 4% or prime + 1%, with a minimum LIBOR floor of 0.25% and a prime rate floor of 3%. Reduction in interest rates, the reduced debt balance, and a greater term loan amortization should meaningfully reduce our cash interest expense this year.
It will also contribute to improved cash flow before the scheduled term loan amortization. We also completed an equity offering in February that raised net proceeds of $22.8 million through the issuance of 2.1 million shares of common stock at a gross offering price of $12 per share. We are looking to deploy these proceeds to support our owner direct strategy and to support possible acquisitions. Shifting to working capital, we had a cash usage from operations this quarter of $17.4 million. This primary driver was a decrease of $13.4 million in our net overbilling position. We're continuing to focus on cash and our billing cycles and are maintaining the disciplines we implemented a year ago.
However, we expect to continue to have ebbs and flows in our cash from operations, depending on the timing of revenue and the life cycle and size of projects in any given reporting period. Additionally, net cash used during the quarter related to the refinancing and the first amortization payment, and that totaled $11.6 million. As we announced in our press release, we expect consolidated revenue for 2021 to be in the range from $480 million-$520 million, with an adjusted EBITDA of between $23 million and $27 million. Beyond providing this typical guidance, our goal is to help investors further understand the business model transition, and in particular, where the company is on that transition continuum. This year, we're expecting GCR revenue in the range of $330 million-$350 million.
The buildup to that range starts with the $85 million in revenues that we earned in Q1, the revenue scheduled to be earned this year on work already in the GCR backlog, which was the $393.6 million as of March 31st, the promise and probable works that hadn't yet been booked into backlog, pending written documentation, and the ordinary course change order activity. What's left to fill the revenue gap isn't very much, and we think the current opportunity set is large enough for us to win and execute that work this year. The GCR revenue range is as expected, below the $440 million in construction revenue that we generated in 2020. Approximately $80 million of the $440 million in revenue from last year was low-margin work, and it would not meet our current project selection criteria in terms of risk, labor allocation, and pricing.
GCR gross margins should be in the range of 10.5%-11.5% for the full year. That's a modest increase year-over-year and on the path to our intermediate-term goal. In the ODR segment, we expect to earn $145 million-$170 million of revenue this year. The buildup to that range is the $29 million in revenue we earned in Q1. The revenue expected to be earned this year from the execution of the $52 million in ODR backlog as of March 31st and the unearned maintenance-based revenue together with associated spot and T&M work.
The rest of the revenue to be earned will likely come from owner direct projects. From a margin perspective, we still believe the normalized range for ODR gross margins is 25%-28%. We performed better in recent quarters, we expect some margin dilution as the relative growth rate of ODR project work accelerates. For both GCR and ODR, timing is a consideration this year. Every one of our operations is focused on the ODR market. I'll hand it over to Mike now.
I'm going to provide updates on our ODR expansion and our continued GCR risk management controls, both of which continue to trend in the right direction. We're seeing success in realigning our local leadership teams to focus on ODR expansion and improve returns from our GCR customer base. We are driving the business to focus on gaining more share of wallet from our 1,100+ contracted ODR maintenance agreements. This should result in more high-margin ODR revenue with little additional sales expense. On the GCR front, we're only working for customers where we have a relationship that has historically proven to deliver strong financial outcomes. We've become very selective and want to make sure that all customers and project opportunities measure up to our criteria. We've just about cycled through the old lower margin GCR work, and there isn't much more backlog.
We expect that residual work to account for more than 5% of our GCR revenue this year. As this less profitable, higher risk business has burned off and replaced it only with projects that meet new, more stringent risk and margin profiles with customers that appreciate the value Limbach creates. Our backlog levels also reflect comfortable labor levels, maximizing our returns with proven Limbach management and craft workers. By design, our current backlog levels are lower than they were a year or more ago. We believe their risk-adjusted profitability is better. The quality of that backlog, together with the better work we're now selling, should allow us to improve gross margins into the future. Our overriding strategy is to secure smaller projects with schedules that complete within a reasonable amount of time. Projects with shorter schedules help mitigate the risk of material and labor cost increases.
With these type of projects, we have a great track record of higher margin outcomes, fewer claims that we tend to be paid promptly. We have a few large-scale projects we're pursuing, but only where we have a successful track record and available Limbach labor resources. The risk management processes we have in place are working. Regarding the claims we've mentioned in the past, we continue to progress each of the issues. With our strong balance sheet, we're prepared to go the distance on these claims to maximize our returns.
I also need to note we have no new projects that have moved into significant claim status in the past 12 months. To reinforce, we're focused on improving margins across all lines of service. It starts with sales, it's great to see the momentum pick up again. I'm pleased to note that our Q1 resulted in a net neutral impact from write-up and write-downs. This further reinforces we are going in the right direction with our strategic and operational plan. I'll hand it off to Matt now.
Thanks, Mike. From an M&A perspective, we're evaluating a number of opportunities. It's just a really interesting time to be in the market doing that. I think we've got great clarity on our strategic objectives. We're looking for businesses that support our own transition to the ODR business model. We're looking for businesses that expand our operating footprint into new and adjacent geographies that share our cultural and core values and that provide for a two-way exchange of expertise and capabilities. We're much more focused on grabbing front-end opportunities than back-of-house opportunities. Of course, we're also looking for good relative and absolute value. When we step back and we look at the broader landscape right now, we see some trends that are sometimes conflicting and which are making for some interesting conversations and process dynamics.
Most obvious is obviously the degree to which COVID's impacted profitability of other contractors. There's some great companies that just had a tough year in 2020. They're seeing the proverbial green shoots and the resulting growth in backlog, but that backlog won't convert to revenue for another quarter or more, and so earnings on a TTM basis haven't quite caught up to the intrinsic value of those businesses. There's the capital gains tax dynamic, where these business owners are both terrified but also pretending not to be when they're engaged with us. Everyone seems to think that an increase in the capital gains tax rate is more likely than not, and so there's a sense of urgency on the part of sellers, but the relative shift in leverage between buyer and seller as a result of that isn't as apparent as you'd expect.
For us, that means we're continuing to explore multiple opportunities in parallel. We're also remaining disciplined, and we're trying to remain flexible where we need to be and where we have to be. Without a doubt, a stronger balance sheet and a stronger macroeconomic backdrop have been supportive of our efforts. We look forward to keeping you updated on the activities and at the right time on the successes.
I have a few closing thoughts I'd like to share. Number one, market diversity. We built our company to be diverse and operate in a variety of end markets, many of which are seeing strong demand. We're going to take advantage of the indoor agricultural boom, which further diversifies the business. We believe that diversification is very important, and it served us well through the pandemic.
We also intend to take advantage of the possible upcoming energy expansion retrofit projects, especially with the new technologies we're employing. The macroeconomic picture for Limbach is very bright. Number two, the ODR growth and overall margin improvement. Our strategy to grow ODR and maximize our margins with both ODR and GCR is simple and smart. As each quarter goes by, our results are proving out our strategic direction. Number three, inflation and labor conditions. We're closely watching the inflationary pressures of the commodity and labor markets. Our vastly improved risk controls incorporate these and other factors and allow us to take appropriate action with pricing and contract terms. Finally, I want to thank one of our board members, Mr. Larry Swets, for his smart contributions over the years. As noted in the earnings release this morning, Larry will be leaving our board once we find a successor.
Our nominating and governance committee will be following the process laid out in our bylaws. The committee will be searching to further diversify our board while seeking experience tied to the strategic direction of the company. Again, I want to thank Larry for all of his contributions. 2021 is a new paradigm for Limbach. A number of initiatives we have undertaken are beginning to crystallize, and we look forward to continuing to update everyone on our progress. With that, we'll take your questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, as we poll for questions. Our first question comes from the line of Rob Brown with Lake Street Capital Markets. Please proceed with your question.
Good morning. My first question has to do with predictability. Given you're talking about a pretty back-end loaded year, how much visibility do you have at this point? How predictable is your business? It seems like the near term is a little still unpredictable, but really how much visibility do you have in the business at this point?
I'm going to start off with just when you look at our backlog with the GCR segment, we're in really good shape. We've sold what we needed to sell. We've got a bit more to close, but we're pretty much there. When you look at the ODR piece, you got to break it down from the standpoint of we've already burned through $29 million of revenue. We have $53 million of backlog in that segment. You also have to take into account the maintenance base that we have, which is north of $15 million. That generally brings through about a multiple of three to four times additional revenue. When you start adding up all those numbers, you'll see that we're pretty much at about $130 million, and that doesn't include the new project sales.
When you start looking at the breakdown of the guidance that Jayme was helping build up to the overall guidance, the $145 million-$170 million is there, and it's just all a question of timing and execution. The sales that we're making right now in Q1, Q2, that work will actually burn in Q3 and Q4. I'll give you an example of one customer. March was a pretty interesting month for us. Our sales were terrific on both segments. The pipeline just opened up, the faucet opened up, and one customer in particular started asking us to quote $1 million-$3 million a week.
We're not being awarded that at that pace just yet, but the budgeting and the pricing indicates their pent-up demand for more service, smaller project type work, which continues to create our perspective that the year is going to be another good year, but it's going to be timed towards the back half, Rob, and that's the way we're looking at it right now.
Okay. Thank you for the color. In terms of the SG&A expenses, Jayme, I think you guided those up a fair amount. I just sort of wanted to get a sense of what's driving that, and given the revenue levels you're talking about, I guess, what's the lever that gets you to the EBITDA you talked about? Is it really the margin expansion in the ODR segment? Maybe just give us a sense of how you get there with that expanding SG&A cost level.
For last year, we obviously with COVID had cut back on initially when the impact hit in March and not knowing how the company was going to weather through it. We really cut back across the company. Obviously travel went to basically zero. With headcount, any kind of initiatives were put on hold. The new run rates really reflective for Q1 is everything kind of coming back to normal, kind of our normal travel rates as well as just the initiatives that we're putting our dollars back into investing into the company for our growth initiatives.
Okay, good. The last question is on the inflation commentary, Charlie, that you had. Are you seeing labor price inflation at this point or labor shortages, or what's the labor conditions right now? How quickly can you adjust price if you are seeing issues there?
This is Mike. I'll take that one. I think the good thing with our strategy going forward is we're looking to secure smaller projects with schedules that are going to move much quicker. That will allow us from a labor perspective to make sure that it's priced correctly. I think the other key thing to note too is we're making sure that our labor levels match our current craft workers, and we're ultimately trying to maximize returns. Ultimately, the quicker projects will help us navigate that.
Okay. Thank you. I'll send it on.
Just another comment. Our pricing services, we get weekly updates into our estimating system every week on any sort of commodity pricing. We're ahead of it. When we buy out our projects, meaning when we're approaching an award of a project, we have a pretty good firm handle on what we're looking at for the materials, the equipment. We budget that accordingly. We also have some contingency in our estimates to allow for variables that happen, including it could be used for inflationary expense if we have to see something just bounce up a little bit more. I think we've got a pretty good handle on it. I just want to reinforce what Mike said. The smaller projects, they're get in and get out, right? We budget them, we get the approval to proceed, we've got our estimates locked in, and off we go.
They're not these long duration projects that take two years or three years to build. Generally, you get some of these projects done in six to 12 months, in and out done. That's a big part of our focus. We are still going to do some large projects, but only with the proven company where we've executed successfully on large projects in the past. Of course, we're looking at those inflationary concerns on the bigger jobs to make sure we're having clear understanding with our customer base that things could be impacted, and we may have to talk to them about it.
Okay. Thank you, I'll turn it over.
Once again, as a reminder, if you would like to ask questions, please press star one on your telephone keypad. Once again, if you would like to ask questions, please press star one on your telephone keypad. Our next question comes from the line of Jon Old with Long Meadow Investors . Please proceed with your question.
Hi, everyone. Thanks for the call. Just a quick question on the GCR gross margin. I think, correct me if I'm wrong, Jayme, if I heard you right, I think you mentioned a targeted 10.5%-11.5% gross margin. Last year it was 10.2%. That included about two points of write-downs, which hopefully now that's behind us based on the first quarter, which was great news. You're taking out $80 million of, I don't know, the very low-margin revenue. Shouldn't that number be closer to 13%-14% if you just do that math, you add back two for write-downs and then take out the $80 million and then just improve general margin? Shouldn't it be higher than that, than 10.5%-11%?
I think we have an opportunity, Jon. Look, it's a great question. When you step back and do the math the way you're doing it. I think we've done a great job at improving execution. We're starting to see that flow through the gross margin numbers. Better selection, better execution in the field. We've got some run room in front of us to continue to prove out that we're doing all the right things. I firmly believe we are. The way you're looking at it, I think you're correct. We're going to continue to see improvement here. We're trying to stay conservative here in our thinking.
Let's continue to prove out our results. Every quarter we're improving. The quarter we just had with no net write-downs. That's the first time that's happened for us in two years. What we put in place 18 months ago, it's now proving out very positive outcomes. We'll continue to update that as we work through the year. Your thinking is correct.
Okay.
Jon, it's Matt. Let me just add to that. As we take the approach of booking good work conservatively, we're going to carry that work probably at a more conservative margin through the majority of the life cycle. As we eliminate the risk items from the scope and we complete that work and feel good about the labor productivity, the material cost, the subcontractor productivity, we'll start to think about whether or not we can take the margins up, but probably not until the project is 60% or 75%.
The last thing we want to do is feel good about a job in the first 25% and book it at 10 points and take it to 11 and then find out we've got a problem later and have to bring it down again. I think we just want to be really careful of that when we really recognize the upside opportunities. We want to make sure we've taken the risk items off the table.
Jon, the other thing I just want to add to kind of when you think about the future with how the company's executing. Existing book of business is being executed much better than in the past, which is obviously great news. The indices that I shared with everybody during my prepared remarks are indicating strong uptick for the industry, which is going to take six to 12 months for architects, six to nine months for architects and engineers to create the designs so the owners can go out and start getting folks like us engaged. The way we're looking at it right now is you're going to see a nice uptick.
The jump in those indices is rather dramatic, and I think that's very important to understand. That's going to give us a lot more opportunities to look at, which means we can become even more selective on what we want to take on. Quite frankly, we should see margin improvement because of the expansion of the marketplace. Q3, Q4 are going to be, I think, exciting quarters for us and will help us really define where we're going in 2022. We're going to continue to rapidly grow the ODR because we just see that as really the place to play and put our resources against.
At the same time with construction, yes, there's been, I think, a healthy look at our backlog and how we're looking at it. As we go forward and we continue to prove out our execution, construction will go back into growth mode. That's probably looking at 2022 right now. This year we're going to stay steady, leverage our human capital, do the best we can with margin, and continue to contribute better numbers to the bottom line. I hope that all makes sense.
Okay, thanks. That can maybe segue into this next question, which I think I've asked you before. This feels like a year that the construction, I'm going to still call it construction, sorry, is sort of being reset and sort of establishes a new base. This gets to my question of the 50/50 mix goal in five years. Obviously, you can't be exact, the roadmap for that, obviously, you can get there by shrinking the construction to $200 million and then the owner direct being $200 million, or it can grow to $600 million. From this base, would you expect the GCR business to continue to grow modestly? I'm just trying to get a feeling for what's the roadmap that you see here?
Sure. It's another good question from the standpoint of how do you look at where we're taking this. The ODR, we're obviously expecting continued very nice growth year-on-year. We're going to continue to push that as heavy as we can. It has some catching up to do with the construction piece to get to that 50/50. As I just stated, the current burn rate that we provided some information on between $330 million and $350 million, that's a good run number for us right now with the quality of talent project management that we have in place. We want to, again, leverage that and maximize our return off that talent. As Mike continues to shepherd the business in terms of execution, and we continue to see improved results, we'll start biting off more.
I think the way to look at it is I would expect through 2022 to start seeing growth come back to the GCR piece. We're going to continue. We'll provide commentary around that, how we're doing. We'll see how the margins are. As we see good execution continue in each of the business units, we'll push those business units for some growth in certain segments. I think the bottom line is this, we do expect to see growth in construction in the future. This year, though, we're going to continue to prove out our execution.
Okay. Great. Thanks. Just the last one from me. Obviously to get, this is going to be more for Matt, but to get to that mix, obviously a big part of that's going to be acquisitions. I'm hoping that this can be a cash generative business, and then you can deploy those resources into acquisitions. Matt, again, just for everyone, realistically, how much can we get done in a year? Obviously, you're going to take it slow, be disciplined, all that stuff. I want to hear this turning into a cash generating flywheel that starts to generate cash, buy something, generate more cash, buy something. How do you see that evolving? Just sort of your roadmap for success in that area.
John, if you look at the ODR revenue range that Jayme provided earlier of $150-$170, basically implies a growth rate a little bit north of 30% relative to last year's number.
Yeah.
This year, we view that as being an organic opportunity. If we get an M&A deal done this year, that would obviously be supplemental and incremental to that. As that number starts to approach 150, 160, 170, it'll become just law of big numbers, right? It'll become more challenging to continue to grow that business in the mid to high- teens on an organic basis. I think M&A in particular for ODR will be important to do if we want to continue to grow that segment at those kinds of growth rates. The market is reasonably supportive right now from an M&A point of view. As I mentioned, there are some sort of weird dynamics between COVID in the rear view mirror, capital gains, tax increases looking forward, and all that will get sorted out here, hopefully, before too long and certainly this year.
I think the market opportunity for us in M&A over the next couple of years will offer up certainly enough volume to hopefully see two to three deals a year over the next couple of years, at least. To reiterate your comments before about needing to maintain discipline and thoughtfulness strategically and financially. If I just look at the number of opportunities in the market and think about how many of them have been on spec for us, there's a strategy there. There's enough volume among that universe that I think we can act, and there's enough there that this isn't a one every other year or one every couple of years type of approach. We're seeing some things that are interesting, and again, we want to be measured in terms of how we do it.
The limiting factor won't be our inability to find businesses that are on target. It will be our ability to integrate them thoughtfully, be disciplined strategically, and make sure that we're carefully managing the balance sheet as a result. I think once we get momentum behind the effort, hopefully doing a couple every 12 months is a realistic objective.
As we said before, I think these are deals that at least in the near term are probably $50 million-$100 million of revenue and might have $3 million-$5 million, $3 million-$6 million of normalized EBITDA, and a decent portion of that is going to be ODR-like, and some of that will be more GCR-like, but it'll be new Limbach GCR, not old Limbach construction. Focused on good end markets for good customers, good risk management practices, but a heavy dose of owner direct work at the same time.
I also want to just reinforce that post the refinancing, we've hit the road hard. We're out there and we're talking to people. Matt's logged quite a few airplane miles here over the past couple of months engaging with face-to-face conversations. It's coming together.
Thanks a lot. I'll pass that back. Appreciate your comments.
Once again, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Once again, if you would like to ask a question, please press star one on your telephone keypad. One moment, please. Our next question comes on the line of Richard Greulich with REG Capital Advisors. Please proceed with your question.
Yeah. Thank you for your increased transparency between the businesses and the way you look at it. I think it's very helpful. I am a little bit concerned about the considerable discussion of acquisitions. Can you describe how you view making acquisitions, what metrics you use versus, let's say, I know it sounds silly since you sold stock earlier in the year, but your stock is down since then, and I'm just wondering how you look at repurchasing your own stock versus buying another company.
Rich, just from a practical perspective, there are limitations on our ability to repurchase stock that are imposed by the terms and conditions of our new senior credit facility. We have greater flexibility now than we did under the prior facility, but there are still certain conditions precedent and conditions that we would need to meet before we could use excess cash flow to repurchase stock.
Okay.
Those are in the credit agreement, and I can point you to them if we want to connect offline.
Okay.
We're obviously always thinking about how to deploy capital both internally and externally. The focus thus far, for a variety of reasons, has been really on sales resources and some other internal resources as we focus on ODR. We've been looking at deals for three and a half years now and have been very patient about pursuing those. We've obviously been working through some balance sheet challenges from time to time too. I think we've got pretty good clarity and pretty good discipline around what we think would be accretive to the business, both financially and strategically. We're going to do a deal when it makes sense for both of those criteria and not just because they're a lot of fun and we just want to get a new Lucite and tombstone that we can put on the desk, right?
Yeah.
We're seeing valuations in the market for what we think are very good businesses that are very accretive to our ODR strategy, that are trading in the range of somewhere between four and a quarter, four and a half, maybe as much as five times. We've seen some businesses that we really like that we're going to trade for greater multiples, and we're just not in the market to buy businesses for five and a half, six times in this market or perhaps even any market, we'll have to see. It's always a balancing act, and we've always tried to maintain a lot of discipline around that. We again, do have some restrictions on where we can allocate capital under the credit agreement. There will come a time where that's an option too, and we'll have to weigh that into the mix.
Thank you.
With that, we've concluded our question and answer session, and I would like to turn the call back over to management for any closing remarks.
just want to thank everybody for joining us this morning. We're pretty excited about our strategy and what we've laid out for everyone. We're executing it. We're doing what we said we were going to do, and we're very excited about this year as we see our margin improvement and the pipeline improving. There's a number of other things we mentioned in today's comments that really indicate a bright future for the company. We thank you for your interest, and we look forward to talking to you on the next quarterly call.
This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.