Prepared remarks
Good morning. Welcome to the Limbach Holdings Second Quarter 2026 Earnings Conference Call and Webcast. All participants will be in listen-only mode. I will now turn the conference over to your host, Lisa Fortuna of Financial Profiles. You may begin.
Good morning, and thank you for joining us today to discuss Limbach Holdings' financial results for the second quarter of 2026. Yesterday, Limbach issued its earnings release and filed its Form 10-Q for the period ended 06/30/2026. Both documents as well as the updated investor presentation are available on the Investor Relations section of the company's website at limbachinc.com. Management may refer to select slides during today's call and encourages investors to review the presentation in its entirety. On today's call are Michael McCann, President and Chief Executive Officer, and Jayme L. Brooks, Executive Vice President and Chief Financial Officer. We will begin with prepared remarks and then open the call to questions. Before we begin, I would like to remind you that today's comments will include forward-looking statements under federal securities laws. Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate, or other comparable words and phrases. Statements that are not historical facts, such as those about expected financial performance, are also forward-looking statements. Actual results may differ materially from those contemplated by such forward-looking statements. A discussion of the factors that could cause a material difference in the company's results compared to these forward-looking statements is contained in Limbach's SEC filings, including reports on Form 10-Ks and 10-Qs. Please note on today's call, we will be referring to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in our second quarter 2026 earnings release and in our presentation, both of which can be found on Limbach's Investor Relations website and have been furnished in the Form 8-Ks filed with the SEC.
With that, I will now turn the call over to President and CEO, Mike McCann. Good morning and thank you for joining us. Yesterday, we reported our second quarter results, as well as the acquisition of Simpcore. Our results fell short of expectations driven by project timing and ongoing softness in health and institutional markets from elevated price sensitivity and market conditions pressuring gross margins. However, underlying customer demand remained healthy. We generated $182 million of bookings during the quarter, our third consecutive quarter of strong bookings, bringing the total bookings over the past three quarters to $616 million. While these market conditions have created near-term pressure, they also underscore the importance of building a more diversified, higher-quality business, and we are taking action. Our focus is diversifying our end markets, expanding our geographic reach and leveraging our integrated platform in an effort to improve profitability. Moving on to strategy. For the past five years, we transformed Limbach. Today, that work allows us to shift from transformation to disciplined growth. Our objective now is to build a larger company with strong cash generation and higher returns over time. First, we are accelerating our efforts for expansion into data centers and industrial manufacturing, building a national platform that mirrors the success we have achieved in our national healthcare platform. By diversifying our exposure across multiple attractive end markets, we believe we will reduce our reliance on any single vertical, better balance the business through market cycles, and create a more resilient platform for long-term growth. Second, we continue to pursue a disciplined acquisition strategy that expands our presence in targeted vertical markets, while extending our reach into attractive high growth regions such as Texas, the Midwest, and the Southeast. By broadening both our market and geographic exposure, we believe we will be able to support customers across more locations, reduce concentration risk, and strengthen our competitive position. Additionally, our acquisition philosophy is not built around buying fully optimized businesses. We are looking for companies with strong customer relationships and attractive strategic positions where we believe Limbach's integrated operating model can create additional value over time. We have already seen that approach produce positive results with Pioneer Power; we have seen encouraging improvements in gross margin, approximately 1.5% from the first half of 2026 compared to when we acquired Pioneer Power in July 2025. We believe each acquisition strengthens the economics of the entire platform because it expands customer relationships, increases cross-selling opportunities, broadens our geographic reach, and enhances the value of our integrated operating model. Third, we are leveraging our integrated operating model to connect capabilities across geographies and service lines, accelerating cross-selling opportunities and improving profitability. We believe our work at Pioneer Power demonstrates how disciplined integration and operational improvements can create meaningful value over time. This integrated operating model also drives value creation from our acquisitions. For example, our targeted operational and pricing actions are underway in an effort to improve Pioneer Power's profitability and bring gross profit margin in line with the company average over the next two to three years. We have a clear roadmap to improve results. By executing this plan, we expect to build a more resilient business with a broader set of growth drivers, less exposure to any single market, and higher margins. Execution of these strategic initiatives expands our national footprint, strengthens customer relationships, increases the scale advantages of our platform. It should strengthen our purchasing power, national account capabilities, operating leverage, and our ability to allocate capital efficiently. We believe these advantages will compound over time, creating a larger, high-quality business with more durable earnings and stronger long-term shareholder value. Importantly, our balance sheet and liquidity provide us with the flexibility to execute this strategy in a disciplined manner. Yesterday's acquisition of Simpcore is an excellent example of our disciplined approach to capital allocation, and drives three of the strategic initiatives I have been describing. This acquisition expands Limbach's geographic footprint, enhances its ability to serve national and multisite data center customers, and increases engagement with building owners early in the facility lifecycle. Equally important, with our integrated operating model, it creates significant cross-selling and pull-through project booking opportunities by connecting complementary service offerings across both organizations, expanding access to new data center customers and generating additional growth within Limbach's existing markets. Through its national program management services, Simpcore currently oversees project budgets for customers that have a cumulative value exceeding $8 billion. We believe this early engagement with customers will create meaningful opportunities for Limbach to provide engineering, construction, commissioning, maintenance and other life cycle services. We have confidence in the acquisition of Simpcore as its business model closely mirrors Limbach's proven healthcare program management platform, which we expect will provide us the ability to drive value in the data center mission-critical market. Over the last 12 months, our healthcare program management platform generated approximately $3 million of professional services revenue, and pulled through approximately $60 million of project bookings, resulting in a 20x pull-through multiple. Looking forward, we currently expect Simpcore to generate $12 million of program management revenue and $4 million of adjusted EBITDA in 2027. Moving on to our verticals. Healthcare: while at a macro level healthcare spending remains pressured by budget constraints and delayed decision making, we continue to strengthen our position by engaging earlier with national customers in our facility planning and long-term travel programs. Those relationships continue to generate larger, more strategic opportunities over time. Industrial: demand in our industrial markets remains strong and increasingly complements our data center strategy, as both are benefiting from sustained investment in power, manufacturing, and mission-critical infrastructure. Lastly, data centers: we continue to view data centers as an attractive long-term growth opportunity. We are steadily investing in the capabilities, customer relationships and professional services platform necessary to establish Limbach as a trusted long-term partner. Before I turn the call over to Jayme, let me close by putting today's results into a broader context of where we are taking Limbach. Despite our near-term challenges, we remain confident in Limbach's long-term direction and our ability to generate shareholder value. We believe the actions we are taking—from investing in our national platform to expanding our capabilities through disciplined acquisitions like Simpcore—are building a stronger, more diversified, higher-quality company with greater long-term earnings power. Our strategy is straightforward: broaden our geographic reach, deepen customer relationships, expand into attractive end markets, and leverage our integrated operating model to create a business that generates higher returns and compounds value over time. We have adjusted our expectations to reflect the business environment as we see it today. We believe our responsibility is straightforward: execute against the plan, continue allocating capital with discipline, and build a business that is stronger and more valuable. We understand that execution is one of our most important measures of success. We are focused on providing continued and better execution. With that, I will turn the call over to Jayme to review our financial results and updated outlook.
Thank you, Mike. Our Form 10-Q and earnings press release filed yesterday provide comprehensive details of our financial results, so I will focus on the highlights of the second quarter of 2026, with all comparisons versus the second quarter of 2025 unless otherwise noted. We generated total revenue of $173.5 million compared to $142.2 million in Q2 2025. The increase was primarily due to the $30.9 million revenue contribution from Pioneer Power. ODR revenue grew 17.9% to $128.4 million with ODR acquisition-related revenue increasing 21.3%, partially offset by a 3.4% decrease in ODR organic revenue. ODR revenue accounted for 74% of total revenue during the quarter. GCR revenue increased 35.3% to $45 million with acquisition-related revenue increasing 23.3% and organic revenue increasing 12%. Total gross profit decreased 6.4% from $39.8 million to $37.3 million. Total gross margin was 21.5%, down from 28% in the prior year quarter. ODR gross profit decreased 2.6% or $800 thousand and ODR gross margin was 24% compared to 29% in the prior year period. GCR gross profit decreased 20.7% or $1.7 million and GCR gross margin was 14.5% from 24.7%. The decrease in both segment gross margin percentages was primarily driven by the current lower margin profile of Pioneer Power. Pioneer Power continues to perform in line with the company's integration expectations, and management expects gross margins to improve as 2026 progresses. Operational and pricing improvement initiatives are underway to enhance profitability at Pioneer Power, with the goal of bringing gross profit margin in line with the company average over the next two to three years. Gross profit margin was also negatively impacted by lower net project write-ups compared to the prior year period and competition for skilled labor and materials associated with construction activity in the data center markets. SG&A expense for the second quarter was $28.1 million, an increase of approximately $1.5 million from $26.6 million. The increase was primarily driven by incremental SG&A expense associated with Pioneer Power and an aggregate $600 thousand increase in total stock-based compensation and payroll-related expenses. As a percentage of revenue, SG&A expense decreased to 16.2% from 18.7% in the second quarter of 2025. Net income for the second quarter decreased 38.8% from $7.8 million to $4.7 million, and earnings per diluted share was $0.39 compared to $0.64. Adjusted net income decreased 32.1% to $7.6 million compared to $11.3 million and adjusted diluted earnings per share decreased from $0.93 to $0.64. Adjusted EBITDA for the quarter decreased 22.3% to $13.9 million compared to $17.9 million. Adjusted EBITDA margin was 8% compared to 12.6% in Q2 last year, primarily driven by the lower gross profit and higher SG&A expense. Turning to cash flow, net operating cash inflow during the quarter was $18.7 million representing our second highest second quarter operating cash flow since becoming a public company. This compares to $2 million in the year-ago period and was driven by net income of $4.7 million, $9.6 million of non-cash adjustments, and a $4.4 million increase from working capital. Free cash flow, defined as cash flow from operating activities excluding changes in working capital minus capital expenditures, was $13.7 million in the second quarter compared to $16.1 million in Q2 last year, representing a $2.4 million decrease. This free cash flow conversion of adjusted EBITDA for the quarter was 98.2% versus 89.7% last year. Turning to our balance sheet. As of June 30, we had $17.5 million in cash and cash equivalents and total debt of $41.1 million, which includes $17.5 million borrowed on our revolving credit facility. Total liquidity, defined as cash and availability on our revolving credit facility, was $93.1 million at the end of the second quarter and on 07/24/2026, the company amended its credit agreement to increase the aggregate principal amount of available borrowings under its revolving credit facility from $100 million to $125 million, providing an additional $25 million in potential availability. As Mike mentioned, yesterday, the company completed its acquisition of Simpcore for a purchase price of $30 million subject to typical post-closing adjustments. The acquisition was funded through a combination of available cash and borrowing under our revolving credit facility. Since the acquisition occurred after the end of the second quarter, the balance sheet as of 06/30/2026 does not include the funding impact of Simpcore. Moving to our outlook. Our revised outlook is based on our strong bookings, projects currently underway and the visibility we have into the balance of the year, and we believe it appropriately reflects the current operating environment and positions us to execute successfully. Accordingly, we have increased our revenue outlook to reflect the timing of project commencements and execution during the remainder of 2026, while lowering our adjusted EBITDA range to reflect the near-term margin and execution headwinds Mike described earlier. This revised guidance excludes any contribution from the recently completed Simpcore acquisition or future acquisitions. For fiscal 2026, we now expect revenue of $760 million to $790 million and adjusted EBITDA of $78 million to $84 million. Our outlook is based on the following operating assumptions: total organic revenue growth of 9% to 14%; ODR revenue as a percentage of total revenue of 70% to 80%; ODR organic revenue growth of 6% to 10%; gross margin percentage of 23% to 24%; and SG&A expense as a percentage of total revenue of 15% to 16%. Importantly, our expectations for cash generation remain unchanged. We continue to expect to convert at least 75% of adjusted EBITDA into free cash flow through disciplined working capital management for fiscal 2026 and expect CapEx to have a run rate of approximately $5 million. This concludes our prepared remarks.
Questions and answers
I will now ask the operator to begin the Q&A. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Please press star followed by the number 2. The first question comes from Christopher Moore with CJS Securities. Please go ahead.
So maybe we'll just start with—good morning. With the ODR organic revenue guide, so you stated, Mike, basically some softness in the healthcare market. Is it project timing? Can you get into it a little bit deeper in terms of the lower revenue growth that you are thinking about for 2026? And does that carry over into 2027? Just trying to understand how you are seeing the healthcare and industrial side of things at this point.
Yes. What gives us confidence from a guidance perspective, both for ODR organic and total organic, is our strong bookings over the last three quarters. We have had $616 million in bookings in Q4, Q1 and Q2. So that gives us confidence. We continue to generate healthy bookings. Each vertical market is a little bit different as far as price sensitivity. Institutional healthcare and several of those markets are challenged. We are still gaining market share and picking up bookings, but the price sensitivity is definitely impacting margins. As far as guidance, whether that is ODR or total revenue, bookings is the biggest thing that gives us confidence, and we hope to continue the momentum from those bookings that leads us into getting off to a strong start next year as well.
Got it. Okay. I will leave that one there. The GCR margin had been pretty strong as you more and more look to avoid the lower-margin third-party work. It is pretty low this quarter. I know there was project timing and the Pioneer work. Is there something more strategic in temporarily taking on data center work even if it is third-party and lower margin to help you gain further expertise in that vertical? That would seem to fit with the Simpcore acquisition.
Yes. There are a couple of things going on with the GCR margin. We had a pretty low point at the end of Q2 from a backlog perspective for GCR, and we have been rebuilding. We are still pointed significantly toward owner-direct concentration, but our model includes some GCR work. At the end of 2025, we finished a lot of work and then started to rebuild from a sales and backlog perspective, and that affects the timing. That is why it was 14.5% in Q2—predominantly a timing issue. I would say diversity is important to us. We are heavily weighted toward institutional and industrial markets. Increasing penetration in the data center market helps in different ways. We are under-indexed in data centers; once we can increase that percentage, I think that will help revenue growth, margins, and absorb fixed costs.
Got it. And maybe just my last one, more big picture. How are you looking at 2026 versus 2027? Is 2026 a full reset from an EBITDA perspective, a partial reset, or no reset at all? Just trying to understand how people should think about 2027.
I do think we needed to reset from a guidance perspective. Even though revenue is up, gross profit is down, and part of that is timing as well as price sensitivity. For 2027, we are making adjustments to ensure our model is resilient. There are three core things we are focused on: vertical market diversity (including data centers), geographic expansion through acquisitions of good companies, and emphasizing our operating model to operate efficiently across locations. We think it is a reset and that going into next year we are making adjustments to have a very resilient model.
Tomohiko Sano with JPMorgan. Please go ahead.
Hi, good morning, everyone. Thank you for taking my questions. Could you give us more color on the healthcare and institutional environment, especially on gaining market share versus the pricing sensitivity you talked about, Mike? How should we look at that environment and the key strategic initiatives in the back half and in 2027, please?
It is still a challenged environment. They are impacted by things that happened from a policy perspective in 2025 and are trying to navigate the new normal. It is our job to guide them to make the right decision. Construction inflation driven by demand in other markets, like data centers, increases the cost for them and makes decisions more challenging. Vertical market diversity will help Limbach and will also help some of our clients. We invest in on-site account managers across verticals, which has been impactful in healthcare. It is a great long-term market; it is just a matter of helping our customers navigate the short term and continuing to stick with them.
Thank you, Mike. On data center work beyond mix and growth opportunities, could you provide more color on gross margin profiles, key cost overrun risks, and contract structure mix, please? Thank you.
The data center buyer cares about time and schedule and will pay up for speed to market, which creates margin opportunities for us. The acquisition of Simpcore is important to jump-start our data center efforts. If we can provide speed to market, there will be opportunities from a margin perspective. We have also progressed on fabrication projects, though often later in the process. From a professional services perspective, being earlier in the process increases our ability to influence outcomes, which can be impactful for margins.
And if I may squeeze the last one: Mike, on Simpcore, could you talk about growth opportunities, margin profiles, and how you manage execution risk alongside the Pioneer integrations, please?
Simpcore mirrors our healthcare program management platform. That platform, started organically about four or five years ago, generated about $3 million in professional services revenue and pulled through about $60 million of project bookings—a large pull-through multiple. We could have developed that capability organically for data centers, but Simpcore gives us a solid business model without contractor execution risk and immediate pull-through potential in a hot market. We are excited about the professional services revenue and pull-through potential. Regarding Pioneer Power, they are performing as expected; we've seen about a 150 basis point improvement since acquisition. Integration takes time, especially in the first year or two, but it's on track and we are applying the same model we've used with other acquisitions.
Gerard Sweeney with ROTH Capital. Please go ahead.
Good morning, Mike and Jayme. Thanks for taking my call. I wanted to dig in a little bit more on Simpcore. When they are brought into a project, how much visibility do they have and their ability to bring Limbach services into that equation? How long would it take to translate some of that professional services revenue into additional services for Limbach?
They are engaged very early, often on the real estate and budgeting side, helping the customer plan. Simpcore manages budgets, cost controls and long-term outcomes, often over multiple projects with the same customer, which gives us visibility. From our healthcare experience, understanding where value can be driven early in the process is critical to pull-through. We are not yet where we need to be in data centers compared to healthcare, but Simpcore gives us immediate visibility and access. There will likely be immediate opportunities in fabrication, procurement, and project performance. After a building is completed, there are opportunities for service, maintenance, and retrofit projects. The opportunity is there; it is up to us to capitalize on it and that will drive when the pull-through starts.
Is Simpcore geographically concentrated in the Texas area or do they have projects all over?
They have presence in Dallas-Fort Worth, other parts of Texas, Atlanta, Charlotte, Northern Virginia, and Richmond. Those areas are markets where we do not currently have presence, so Simpcore gives us visibility into attractive markets and may create acquisition opportunities for contractors down the line. They work with general contractors and mechanical and electrical contractors, which gets us into markets we are not in today. We can pull through work without being in a market through fabrication and specialty work, but Simpcore gives us an avenue to decide what geographic expansion we want and connect the dots for pull-through opportunity.
That is fair. I get that. On ODR, healthcare and ODR end markets obviously have some pressure on spending as well as some costs. How do you recapture those margins? Is it a pricing game? At some point do the healthcare companies have to absorb these costs?
There are a couple things. Customers have to absorb changing costs, but they are methodical and won't dramatically change how they purchase overnight. Over the past 12 months things have been different for them; they are looking at bundling, portfolio-wide decisions about which assets are making money, and long-term planning. For us, the biggest thing is helping them look at things differently and driving value through the process. Fixed cost absorption through diversification into other vertical markets will also help margins. There is no magic button; it is our ability to stick with them, find avenues to drive value, and remain a long-term partner that will create opportunities.
Robert Brown with Lake Street Capital. Please go ahead.
Good morning. Just wanted to follow up on the margin question about some of the things you are doing. How long does that take to cycle through? Is this something you can see improvement in 2027 or what is the duration of the margin improvement?
There are a couple of things. Timing is important and relates back to sales positioning and lack of sales in the middle of last year. We expect to perform the way we have in the past and deliver. We are looking for potential margin opportunities in 2027 based on the current book of business. Diversifying into higher-growth verticals and geographic expansion will also help. The combination of those factors and the adjustments we are making should present increased opportunity in 2027.
On Simpcore pull-through in the data center market, how long does that take to work through the system? How does Simpcore work on timing?
We have experience working with program managers in the data center market who are not Limbach today, so we have some familiarity. We need to learn their customers. The advantage with Simpcore is they are bringing new customers to the table, which is additive. It will take some time, but we will immediately look for pull-through opportunities. We will be talking to customers in the next few days to find opportunities. We will be opportunistic, but it will take some time to realize the full pull-through.
Brian Brophy with Stifel. Please go ahead.
Yes, thanks. Good morning. Appreciate taking the question. Can you give us a sense for how fast Simpcore has been growing?
They have been pretty steady from an earnings perspective and have been working in the data center space for the last four or five years. The challenge for them has been responding to demand, which comes down to recruiting staff. They are excited about our ability to add staff immediately. As a smaller company, recruiting takes time while trying to respond to customer demand. We like that they were steady, and we will immediately look to add staff to drive quality, high gross margin revenue.
Understood. That is helpful. Circling back to GCR gross margins for a minute: were there one or two projects in particular that drove the lower gross margin, or is it more broad-based?
It was not an execution issue; it was project starting more than anything. We had steady execution through the first half of the year, but project starts and backlog timing impacted margins. At the end of Q3 last year, GCR backlog was about $99 million and we've rebuilt that to roughly $200 million. Timing affected Q2 margins. We expect opportunities for GCR margins as projects start, but timing could push some opportunity into 2027, which influenced our guidance adjustments.
And the longer-term mix between the two segments—how are you thinking about that now that GCR is back in growth mode?
We updated our guidance to target ODR as 70% to 80% of total revenue. We view our model as owner-direct driven and are focused on finding the right mix and balance between segments. That mix will influence which verticals we pursue and our long-term strategy. Going from the prior midpoint to 70% to 80% is not a huge change but it reflects the right balance for now.
A follow-up from Christopher Moore with CJS Securities. Please go ahead.
Just one question on bookings. You mentioned three straight quarters of good bookings. I know calendar Q3 last year was a challenge and created the soft Q1 2026. You are only a month into Q3 so far. Any thoughts in terms of July? When did things go soft last year in Q3—was it later in the quarter? Just trying to get a sense of visibility for Q3 bookings.
Q3 last year was different; it was a culmination of policy impacts on higher education, healthcare, and manufacturing that pushed customers into a compression mode entering Q3, which led to weaker activity. Over the last three quarters we've gotten back to a steadier pace, and that steady pace is what we are looking for as we close out the year.
We have no further questions. I will turn the call back over to Mike McCann for closing comments.
Our conviction in the long-term direction of Limbach has not changed. We have reset expectations to reflect where the business stands today and are focused on executing from here. We have a clear roadmap to build an even more resilient business centered around vertical diversification, geographic expansion, and an integrated operating model. These three strategic objectives will build enterprise scale that will accelerate growth, expand margins and drive additional shareholder value. Thank you, everyone, for your interest in Limbach.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.