Limbach is enhancing its value proposition by shifting towards proactive sales and strategic M&A to position itself as a building system solutions provider. Through targeted acquisitions, the company aims to diversify its revenue streams, focusing on predictable maintenance contracts, work orders, and time and material work for stability and growth.
The company’s revenue streams in the ODR segment include maintenance contracts, work orders, and time and material work, which collectively account for approximately 1/3 of the revenue year-to-date 2025. By focusing on smaller, recurring projects, Limbach aims to reduce risk and enhance margin consistency in a changing economic environment.
Limbach’s intentional pivot towards owner-direct relationships has reshaped its revenue mix, with ODR projects accounting for approximately 2/3 of the ODR revenue year-to-date 2025. By increasing focus on ODR growth and reducing GCR revenue, the company aims to drive margin expansion and earnings growth while managing overall risk.
The strategic shift from GCR to ODR projects has impacted backlog predictability, as quick-burning, shorter-term projects are often completed within the same quarter and not captured in backlog figures. While backlog remains an important indicator, it may not fully reflect the current revenue streams generated by Limbach’s diversified business model.
Limbach’s focus on building a diversified business with multiple revenue streams has led to a shift away from high-risk, multiyear projects towards smaller, recurring work. By emphasizing stability, predictability, and long-term value creation, the company aims to navigate economic cycles and enhance resilience in the market. Selective mergers and acquisitions drive growth strategy, expanding geographic footprint and market share. Six high-quality businesses acquired at fair values, enhancing owner-focused vision. Focus on improving margins through value creation processes after closing deals. Disciplined underwriting, strategic fit, and asymmetrical returns key to successful acquisitions.
Healthcare sector remains strong, with customers prioritizing long-term planning and cost certainty. Proactive programs help minimize risk and downtime, leading to $12 million in capital projects. Industrial manufacturing markets see seasonal shutdowns and facility upgrades. Data center market focus on supporting hyperscale operators. Higher education clients cautious amid policy uncertainty, but ramping up spending for coming year.
Culture and entertainment vertical shows consistent spending from key customers. Major client plans significant budget expansion for next year, inviting input on project list. Sales and marketing initiatives emphasize building sales team to anticipate challenges and craft unique solutions. Investments in sales team training lead to higher SG&A relative to competitors. Limbach Holdings is focusing on enhancing SG&A effectiveness and boosting gross profit quality to yield positive results. The company prioritizes deepening sales training for a strong start in 2026. They emphasize proactive capacity with owners, exemplified by a successful capital project in Florida that showcased early issue identification and compelling investment justification.
In a recent example, Limbach supported a healthcare customer with $25 billion in annual revenue by identifying and proposing a repair project early, leading to funding and Phase 1 award. Their professional services, like MEP engineering and program management, attract national clients, enabling margin expansion and future market expansion into data centers and industrial manufacturing.
Limbach anticipates achieving long-term gross margins of 35% to 40% by focusing on consultative solution sales and bundled offerings for sustainable growth. They reaffirm their 2025 revenue guidance and plan to integrate Pioneer Power for enhanced margins. Total revenue growth exceeded expectations, with ODR revenue accounting for a significant portion and gross profit reflecting continued growth in the ODR segment, albeit with slightly lower margins due to Pioneer Power’s contribution.
Total revenue for the third quarter reached $184.6 million, reflecting a 37.8% growth from the previous year, driven by ODR revenue. ODR revenue accounted for 76.6% of total revenue, showcasing the company’s strategic shift. Despite a slight decrease in gross margin due to Pioneer Power’s contribution, the company remains focused on improving acquired companies’ margins over time to align with their operating model. In the third quarter, Pioneer Power saw a decrease in segment margin due to a lower gross margin profile. However, GCR gross profit increased by $2.5 million, driven by higher margins of 20.8%. SG&A expense increased by 19.3% to $28.3 million, including expenses from acquisitions.
Net income for the quarter increased by 17.4% to $8.8 million, with earnings per diluted share growing by 17.7%. Adjusted net income grew by 16.4% to $12.7 million. Operating cash inflow was $13.3 million, a significant increase from the previous year, primarily due to changes in working capital.
Free cash flow for the quarter was $17.9 million, representing a $4.8 million increase from the previous year. The free cash flow conversion of adjusted EBITDA was 82%. The company aims for a free cash flow conversion rate of at least 75% for the full year 2025, with expected capital expenditures of around $3 million.
As of September 30, the company had $9.8 million in cash and total debt of $61.9 million, including $34.5 million borrowed on a revolving credit facility. The company’s total liquidity was $70.3 million, with plans to reduce borrowings under the credit facility. The company remains well-positioned for growth and strategic initiatives.
Pioneer Power is expected to contribute around $60 million by year-end, with a significant portion coming from owner direct revenue. The company is focused on improving margins and operational systems to enhance profitability. The acquisition has shown strong performance in the industrial segment, with potential for further growth and efficiency improvements. Pioneer Power’s proactive sales team drives margin expansion over time. SG&A as a percentage of revenue decreased due to Pioneer’s profile. Investments needed for 2026. Margins fluctuate quarterly based on work mix. ODR organic growth at 14.4%, with acceleration expected in Q4. Sales team investments paying off in revenue growth.
$12 million in capital projects awarded from facility assessments leading to further opportunities. Relationships start with maintenance projects and expand to national sectors like data centers and industrial. Facility assessments lead to project pro formas. 20 assessments resulted in $12 million projects across different sites. The company is excited about new opportunities with multiple customers and assessments leading to more work. They plan to focus on local maintenance agreements, national relationships, and investing in sales staff to drive growth. The goal is to provide resources and support to make the sales team successful.
Organic growth is a key focus, with a strategy to be selective in GCR and opportunistic in owner-direct projects. The company is building a long-term sales team for sustained success. While no target has been set beyond this year, they are investing for the future to achieve 20-25% organic growth.
Margin improvement is a priority, with a focus on transitioning to a new accounting system and analyzing gross profit benchmarks. The goal is to increase efficiency and identify opportunities for growth. By selling proactively and understanding customer needs, the company aims to drive high-margin capital projects from recurring OpEx spend. Pioneer Power is focused on improving margins through operational excellence and proactive programs. Questions were raised about organic growth and budget flush in the fourth quarter. CEO Michael McCann discussed customer budget spending and future opportunities in various sectors like healthcare and education. Visibility in owner direct revenue is divided into quick work and small projects, with an increasing focus on national relationships after years of building trust with clients. Limbach’s priorities for closing out 2025 include driving top-line growth, expanding customer relationships, and successful integration of Pioneer for M&A pipeline building. Their unique business model focuses on consultative engagement, helping clients develop multiyear capital plans. They believe this model positions them for sustained growth and risk-adjusted returns.
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