Okay, great. Thanks, all. Welcome to the Limbach Fireside for the Oppenheimer Industrials Virtual Conference. My name's Brent Thielman, equity research analyst with Oppenheimer. Really pleased to have Mike McCann, CEO, and Jayme Brooks, CFO, here to have an open discussion. You know, Mike, maybe just to kick it off with you, if you could just give us kind of a short overview of your business, and in particular, just for folks dialing in, yeah, how do we think about comparing your business to some of your public peers out there? Kind of what are the main differentiators investors ought to be considering there?
Yeah, I appreciate that. Thanks very much for having me. We're a building system solutions firm focused on mission-critical facilities. We perform mechanical, electrical, and plumbing infrastructure work. We have a geographic footprint that is Northeast, Southeast, and Midwest. Our primary vertical markets, really, we have six vertical markets that we work in: healthcare, industrial, manufacturing, data centers, life science, higher ed, and culture entertainment. I think the key common characteristic is the ability for us to work in that super mission-critical environment where they absolutely has to have us. We've got two segments: Owner Direct Relationship, think existing building, and General Contractor Relationships, traditionally new construction. Over the last four or five years, we've been really focused on shifting the business from a traditional E&C large construction to more of an Owner Direct model.
As we go into 2026, we feel like we've reached a relative mix stabilization and we think we're in a position to really grow the company. When it comes to differentiators, I would think about it in really in three different buckets. One is our ability to have a connected footprint. Especially when you think about us acquiring companies, everybody's on an interconnected platform working together, and I think about it from a customer experience perspective. We want the experience to be the same in Tampa, that as in Boston, that as in Columbus, Ohio. That's number one. Number two is our expertise is really providing creative solutions that we can install. We don't necessarily have a separate engineering company and a separate installation company. Our ability is to provide the integrated offerings on each location as well too.
When I think about the third piece of it, I really think our ability to be nimble quick, and when we go speed to market, we're providing a different level of expectation and experience than maybe somebody who's much more of a generalist, that's a transactional type, contractor they're working for. I would think about us not necessarily as a contractor, I would think about us as a solutions partner that can do anything from front-end integrated facility planning, service maintenance, through complex installations.
That's great. Mike, just as a clarification on ODR, Owner Direct, is effectively all of that in something that's existing? There's no new construction engaged in that?
Yeah. They're primarily. You know, when we do the breakouts of Owner Direct Relationship, General Contractor Relationships, that segment is defined by who we're working for and who our relationship with. It's more defined there than it is necessarily existing or new. Traditionally, though, our Owner Direct Relationship work tends to be more existing from that perspective. Just to add a little bit to, our goal is to stick with accounts over the long term. We wanna deploy our six customer solutions. When we make a move to go with a customer or put additional focus on a vertical market, we think building a 10, 20, 30-year relationship. We don't think about this as we're gonna build one project and leave. That's just a different approach that we have.
Yep. Okay, great. Well, Mike or Jayme , I guess, as you kinda look at the performance to start the year, and I know we're already approaching midyear, but I think you'd mentioned, you know, certain customers, especially in healthcare, had seen some delays in spending. Maybe some things you thought to do didn't come to fruition. Maybe just walk us through what's happened, and if you're starting to see some of those delays abate and why.
Sure. I think we had a lot of lessons learned from 2025. I think there's a couple things that we've learned is we wanna make sure we're really diversified. Healthcare is our strongest vertical market focus. There was a lot of different things last year that made some of our verticals more challenging, and I would say that really popped up in the middle of 2025, whether that was Big, Beautiful Bill or NIH spending with higher ed or tariffs with manufacturing. It's not like necessarily they stopped spending, but they weren't spending as aggressively. Coming off an election year, just some challenges for those. This year, I think we're really focused on having good vertical market diversity between industrial, institutional, think about higher ed and healthcare, as well as data centers.
We wanna make sure we have strong diversity. The last couple quarters, we've really been able to build our bookings. We've sold $225 million in Q4 and $209 million in Q1. $434 million of booking is probably our strongest couple quarters that we've had. We've really rebuilt the demand. diversification has helped, but also I think from our core vertical markets, just getting some level of stability, a certain certainty has helped as well too. We feel like we've definitely got some momentum. A challenge for us, I think, as we've learned through our mix shift and as well as kind of our strategy, is sales are really, really important to us. We've got certainly we've got two of our top executives on it.
We've got sales processes we've put in place, and I think we're excited to see the last couple of quarters where that's finally coming to fruition. You sell it, then it revenues. I think Q1 is kind of an air pocket to kind of momentum that we see building over the course of 2026 into 2027.
Yeah. Okay. Well, Mike, I mean, maybe just on the data center front, because relatively newer in some respects to the story, I guess, even though you've done these a long time or been involved a long time in these. Think you've picked up a couple of new centers here the last few quarters. Seems like you're more than just dipping your toes in the market here. You're here to stay. What. You've been really careful since you've come into the business, and just in terms of de-risking the company. Can you talk about the risk profile on these recent wins and kind of what gets you comfortable with that market as you go out for more business?
I think there's a couple things that have really changed. Like you said, we've been doing data center work for probably eight or 10 years, and a lot of that's been our Columbus, Ohio market. We have These aren't necessarily new relationships and expansion of existing relationships, I would say. The spend is there, and the supply and demand curves are certainly in our favor. I could think about all six of our customer solutions as real opportunities. As you pointed out, we're risk managers as much as maybe anybody in the space, and we've learned that through things that haven't worked as well in the past.
We wanna have a good optimistic outlook, but we don't wanna be caught to the point where we think, you know, it's too rosy from that perspective. For us, we wanna mitigate risk. As an example, we sold a $30 million fabrication project, that's probably the fifth or sixth project that we've sold direct to owner. $2 million, $5 million, $10 million. We don't like to take a huge chunk. We really like to grow. This opportunity is a very fast-moving; we're actually dropping it off on site. It'd be more like a product at that point. We look at schedule, scope, risk, and we try to evaluate that. We have some capacity too. We have some capacity from a fabrication perspective. I would say some, I'd say a lot of capacity.
We have 14 acres fabrication facility in Chattanooga that's barely been underutilized. We have some labor capabilities as well, too. There's a number of different aspects where I think we can be opportunistic and be smart about the way that we deploy that. We always take all our lessons learned. Sometimes those lessons learned hurt us, by the way, because we know too much. We apply those going forward. The exciting part to me is we're gonna be able to deploy our six customer solutions, service and maintenance, rentals, retrofits, infrastructure, et cetera, et cetera. I think those are avenues.
The other thing that excites me in this space, too, is I think there's gonna be a lot of day two work, and I think the advent of liquid cooling is gonna be something that's very interesting for us as well too. We're a really good fit for that, to go into an existing campus, and typically these campuses have new builds and existing. It's just a massive site that ends up happening. We are a great candidate to go into those and retrofit those locations as well, too. Various entry points that we're excited about. It just felt like the right time to put a little bit more focus on it.
Mike, I mean, you hit on something that I wanted to ask. Is the data center stuff all ODR business and existing facilities?
It's a mix. You know, like the $30 million fabrication was an Owner Direct project or contracted direct with the owner. We've put some contract vehicles in place over the last couple years to make this a little bit easier for us. We've been kind of planning a little bit for this and trying to figure out, okay, then when do we essentially accelerate that? Contract vehicles and mechanisms are important to work for the owner whenever possible. There's gonna be some GCR work with this. I think this year, as an example, our guide includes 20%-25% GCR. If we can get the best return on data center work, we're gonna be smart about that.
We always still rather work for the owner, and we don't wanna make it so difficult to work for us, but we'd always rather work for the owner. We push that whenever possible. It's gonna be a mix, but we're gonna be smart about that too.
Yeah. Presumably, as more of these go to retrofits, you're in a good spot there.
Yeah, I mean, I The last stat I showed was 92% of spend or 93% spend goes to new construction.
Right
You know, that changes to 10 or 20%, that's plenty of work.
Yeah. out of curiosity, is there a, you know, kind of a future maintenance contract?
Yes
Program opportunity here for you?
Absolutely. We've got a couple that we're looking at. I think the maintenance space is very interesting. I think it's really strong with the OEMs, and a lot of that is primarily due to main source cooling equipment. I think we've had a lot of discussions where they do a good job, but that's a lot for them. What are some avenues? Maybe it's not the main source cooling equipment where there's opportunity to do service and maintenance. We do some of that already in Columbus. We've been asked to take a look at some other areas. You know, what footprint can we perform in?
We've had those discussions as well too. Various RFPs that have come out or questions or just questions from customers as well too, that kind of excites us. Yo u know, even if the OEMs get the majority of the service and maintenance on their main chillers and cooling equipment, there's still plenty to go around.
Yeah. Okay. You know, might you kinda conceptualize what this looks like for you in next few years? I mean, do you envision this market being something next to healthcare, which is obviously a huge market for you?
We do. I think we anticipate kind of a good mix between institutional, which includes healthcare, higher ed, industrial and data center, and I would say kind of advanced tech and relative kind of low relative work in this space. I think we get a good mix there. We don't wanna over-index, but we're probably under-indexed now. I think we're in a good position to kinda smartly add revenue into that. I think maybe the Q1 bookings are kind of a good indication of, you know, what this could be for us. We sold $209 million in Q1. $56 million of that was data center. The other $155 million was not data center. It's still a 1.12 book-to-bill.
You can see, like, in this one quarter, like, we can still get a good book-to-bill, and this can be really additive. It's probably the best way to describe what it could look like in the future.
Awesome. Okay. Maybe just turn into, like, the other kind of pillars of growth here, beyond some of the market opportunities.
Sure.
You've been acquisitive here since you've come in, done some good deals. I mean, one thing I wonder about, Mike, is, I guess one is, what are you looking for in the market? I know you've done Pioneer Power. Two, does the ODR model work everywhere as you look into new geographies and trying to do M&A?
Yeah. Couple things I'd say primarily we look at: geographic footprint. Geographic footprint helps us for every vertical. You know, I wouldn't say every. There's a couple. Higher ed and culture entertainment can be a little challenging. The other four, there's avenues from a national customer perspective. I think that's the primary. I think the secondary is, can we enhance our customer solutions? When I think about Owner Direct, I think about kind of translating that into what our vertical market and customer focus is. That's ultimately the discussion that we have a lot with the acquisitions is how can I enhance relationships and get to the owner as much? I think that concept works in any, every geography, but it's gonna be a little bit dependent on their customers.
We want to build a strong mix and improve margins as well, too. Footprint's really important. As we build our three national vertical market teams, data center, healthcare, and industrial, those are really going to help accelerate the value creation process from these acquisitions. The three things we're looking at from acquisitions is cultural fit. Are they going to want to make some changes with your what that translates to? What type of customers do they have? What's the opportunity ultimately? We layer that on to kind of our overall value creation process, and Pioneer is probably an example of that. We've done six since late 2021; they got a core business in industrial and higher ed. Can we layer on healthcare and data centers? Can we get to the end user whenever possible?
Those are things that we're gonna look for. Then can we raise margins as well too? Footprint and customer solutions are the primary. We've got a pretty robust pipeline right now. It's been a little bit of time since we've done a deal, and Jayme and I wanna get deals done this year.
That's great. Maybe just on Pioneer, I know it's somewhat dilutive to margins for a period of time before you can get them higher. When do you think you'll be through that, or when does it become sort of negligible in terms of impact to corporate margins?
We're hoping to see some improvement in the back half, and I think 2027, you know, is really gonna be the part where we can really ultimately institute some big- time margin changes for us. Ultimately, what happens in a lot of these acquisitions is kind of our differentiators, as I talked about before. One of our three is our interconnected group of people, structure, and locations. First thing we do the first six to nine months is integrate all the systems, accounting system, HR, benefits, structure. That ends up being enough, I think, usually what we've learned in the first six or nine months. Don't delay it. Get it over with. An ERP transition is never fun. Faster it's done, the better.
Then I think, you know, like especially right now, for example, now we're into value creation process, renegotiating contracts, focusing on one customer, not a lot, bringing in solutions from the overall company. You can see how this ultimately takes some time because you think about you're instituting changes now that you hope to focus last year. When you think about kind of a calendar year planning cycle, 2027 is almost in some sense when they're on the full footprint, when they're on our platform, integration's done, we've made the moves from customers, and then you start to really see the benefit of it. We have an example in the investor deck that we put out, and this really was new in March from our Q4, which kind of describes the Jake Marshall transition.
One thing to note on the Jake Marshall transition is we took a lot of time on phase one. We figured, well, let's switch the ERP system over a year later. Well, we learned that's not gonna be helpful if you're just delaying the inevitable. I think we're trying to shorten obviously phase one and get into phase two as quick as possible, so we can kind of see a similar bump.
Okay. The majority of the transactions you're looking at, I mean, are they gonna be along the lines of a Pioneer Power and that they may be lower margins initially, or is that not really always the case?
I mean, mostly every deal we've done, the margins have been lower. Pioneer is bigger, obviously, they're more impactful. It's up to us, I think, to make sure we describe that at the time of the deal. Some lessons learned on that, certainly. I think it depends. You know, for us, you know, the higher margins are great in one sense, also there's less opportunity to, you know, even have the initial valuation more and more accretive after two years. I think the margins tend to be less in these deals. I think, you know, we're gonna figure out. Again, we've learned a lot over six deals, you know, we haven't done one a little bit, we've learned a lot about that.
Building that upfront value creation model and then giving investors as much details as we can about that margin climb is something I think we're really focused on. If we can get one with good margins, that's great. It's probably just less value in the back end that we can drive. I think for us, you know, a really small deal is taxing for our team. It's gotta be of size and scale, and scale does matter to a point as well, too. I think one important thing from our acquisition strategy is we gotta grow to the company, scale, and I always think of scale in terms of what we can do for our customers. I know some of the other stakeholders, it kinda takes care of itself.
The one thing that was good about Pioneer Power is they're a brand name in that market. It's not, you know, a small $20 million or $30 million business where you've got a few people that hold all the relationships. It's a much stickier when you've got 40, 50 people in the office and the relationships are diversified, and that's really helpful. I think some scale with the deals makes sense. I think a smaller deal for us has to be, you know, higher margins or super creative in value based on some sort of existing footprint that we have. I think footprint is probably the top focus.
Yeah. Mike, there's been a lot of capital chasing MEP companies lately. I imagine many of the things you're looking at maybe get overlooked by some of the bigger balance sheet folks.
Yeah. I mean, it's amazing. I mean, we're never shy to make a call anymore because at some point, they'll pick up the phone. They're getting enough calls. You know, I think it's leveled out a lot, too. I think, you know, PE really entered the space, I would say, my opinion, early 2025, late 2024. Everybody is had to put their feelers out. When I say everybody, I really am talking about these private companies. It's not a surprise they're getting a call anymore. I think they know who we are, they know the deals that we've done, and Limbach still has a really good brand. I mean, this is our 125th year. You think about that pales in comparison to most public companies for in our space and even private companies.
The name certainly means something. That I feel like gets us calls where we can make the calls direct. I mean, if they're meetings, I'll make the calls, or we have internal and external resources, I think that strong brand is a differentiator as well, too.
Yep. Maybe just a question on the GCR piece of the business. Mike, some of the feedback you seem to get is that the demand environment for MEP is, you know, especially with data centers and other kinda hot sectors out there, it's sorta having that positive indirect influence, forcing better contract terms all around. I also know that can be very regional. Are you seeing any of that effect where, sort of, the GCR terms and conditions, and I guess margin potential, is getting more attractive, where you're willing to go after that work? I know data centers kinda fall onto that, but other areas too.
It's interesting. I've had a few different conversations exactly along this lines in really this year, I would say more than any other year. Not all our markets have the data center input. The markets that do, the Columbus, Ohio, you know, the D.C. market, and that's a little bit of an older data center market. Maybe Columbus is probably the best example. It definitely helps. I think again, I mean, they need people to do the work. They understand that, you know, costs have to go up. I think it helps the overall market; it changes the way that people look at the services that we're ultimately providing. Absolutely, even from a general contractor perspective, I think they realize that they've gotta be a little bit more open than they have in the past.
I think the other thing too that has indirectly affected the other verticals, but came out of the data center, like you think about a data center, mechanical electrical is important. Building the building is, it's not that complicated. Mechanical electrical are now elevated from that perspective. You think about the package that we provided on that $30 million fabrication job. I mean, we're able to do that direct. I think the elevation of that it's interesting. The other thing too, I would tell you on this, and a little bit off topic, is we've even some of our healthcare customers looking at almost talking to us in a way like a data center customers. "Tell us where you can work.
What's the footprint? You know, we're a little bit different than a lot of the other E&C companies, but our approach is different. You know, I think the focus on MEP being important definitely helps the overall business and overall businesses in the space.
Yeah. Well, maybe along those same lines, I mean, you think about some of these regions where you are seeing that. Does that trickle into the ODR piece of the business too, or is it just a different model?
I think it does. You know, it's very indirect, though. You know, Columbus is a good example. I mean, we are strong healthcare, higher ed, and we've got a pretty good diversified market. Like, if I look at where Columbus is, and I think about that would be a good proxy for what the overall business could look like as it exits in these markets. You know, we're doing Owner Direct work for four or five of our key verticals. Maybe not industrial in Columbus, but the other ones we have. They've got a nice diversification. Yeah, I think it does, and I think it's primarily in a positive way, more than anything.
It just makes the customers, whether it's an Owner Direct customer or a general contractor customer, it just makes them appreciate what we're doing a little bit more. Like you talked about, it can also lead to terms, too.
Yeah.
Yeah, I'm excited, you know, as it leads into further expansion. There's some markets where there's just no data center yet, you know, like Florida, for example. My guess is every market's gonna see some impact of it, and I think it's something exciting that we're gonna embrace, whether we do the data center work or not within the market. We're gonna be smart about it. It still doesn't hurt, though.
Yeah. Okay. Maybe this one might be for Jayme, but, you know, obviously, you wanna keep some dry powder for deals. Any other objectives with the balance sheet, or, I guess, kind of initiatives around cash flow, to discuss here?
Yeah. I mean, from a capital allocation perspective, our priority is acquisitions. You know, we do have a revolver. We expand it to $100 million; we do have that availability there from a liquidity perspective, for as we're looking at transactions. Two, you know, this quarter was a draw on cash as expected, as we continue to You know, throughout the quarters, we're selling, we're generating the revenue, billing, and collecting that cash, we expect the stronger cash flow in the back half of the year.
Repurchases, is that something you all look at, or you're just really predominantly focused on growth?
We do have a repurchase set up. We are, you know, gonna use it opportunistically as, you know, we see the market conditions. Our priority is really looking at those acquisitions.
Okay. You mentioned, you know, obviously acquisitions, I mean, other things, Mike or Jayme , that you wanna prioritize this year, securing more data center business. Kind of an open floor to you, just in terms of what else you're focused on here for this year.
Yeah. I think the biggest thing for us is vertical market diversification. I think that's gonna be led locally and nationally, where we have our three national vertical market teams, and they're gonna explore different relationships in data center, industrial, and healthcare. I think we're gonna layer that in with local sales, and we want our acquisition strategy to be closely tied to that as well, too. We wanna target these key national relationships and add and have really good conversations with them about how the footprint would affect and extend our offering. When I think about it's, we're not quite a national player yet.
Yeah
I think we're gonna be in a position here as we do some smart deals to really change our overall market position as we, you know, expand and grow our footprint within those, you know, diversified vertical markets. I think that's really our biggest focus this year, and I think we've got a lot of runway here and opportunity to do so.
Awesome. Well, I think that's a good stopping point. Mike, Jayme really appreciate the time.
The discussion here. A lot of exciting things here at Limbach. Thank you.
Thank you, Brent.
Okay.