Limbach Holdings, Inc. (LMB) Earnings

Management highlights

- Near-Term Performance Overview * Q2 2026 results missed management expectations, driven by project timing delays and ongoing softness in healthcare and institutional markets from elevated price sensitivity that pressured gross margins. * Underlying customer demand remained healthy, with $182 million in bookings in Q2 2026, marking the third consecutive quarter of strong bookings. Total bookings over the past three quarters reached $616 million. * The company recently completed the $30 million acquisition of Simcor, a data center program management firm, after quarter-end. - Strategic Direction * After five years of business transformation, Lindbach is shifting focus to disciplined growth, with the core objective of building a larger business with strong cash generation and higher long-term returns. * First strategic pillar: Accelerate expansion in high-growth data center and industrial manufacturing end markets to build a diversified national platform, reduce reliance on any single vertical, and improve resilience through market cycles. * Second strategic pillar: Pursue disciplined acquisitions to expand presence in target verticals and high-growth regions (Texas, Midwest, Southeast). The company targets businesses with strong customer relationships and attractive strategic positions, where Lindbach's integrated operating model can add incremental value. Pioneer Power, acquired in July 2025, has already delivered a 1.5% gross margin improvement in H1 2026, with a target to reach company average gross margins over 2-3 years via ongoing operational and pricing initiatives. * Third strategic pillar: Leverage the integrated operating model to connect capabilities across geographies and service lines, accelerate cross-selling, and improve overall profitability. - Simcor Acquisition Rationale & Benefits * Simcor expands Lindbach's geographic footprint, enhances data center customer capabilities, and enables early customer engagement in the facility lifecycle. Simcor currently oversees cumulative project budgets exceeding $8 billion for its clients. * Simcor's business model mirrors Lindbach's successful healthcare program management platform, which generates $3 million in annual professional service revenue and pulls through $60 million in project bookings (a 20x pull-through multiple). Management expects Simcor to generate $12 million in program management revenue and $4 million in adjusted EBITDA in 2027. - Vertical Market Updates * Healthcare: Macroeconomic budget constraints and delayed customer decision-making persist, but Lindbach continues gaining market share by strengthening early customer engagement on long-term facility planning. * Industrial: Demand remains strong and complements the company's data center strategy, as both verticals benefit from sustained investment in power, manufacturing, and mission-critical infrastructure. * Data Centers: Viewed as a high-potential long-term growth market; Lindbach is steadily investing in capabilities, customer relationships, and professional services to establish itself as a trusted long-term partner.

Guidance

- Management revised full-year 2026 guidance to reflect current market conditions, recent project timing, and near-term margin headwinds; guidance excludes any revenue or earnings contribution from the Simcor acquisition or future acquisitions. - Revenue guidance was increased to a range of $760 million to $790 million, up from prior guidance, to reflect updated project commencement timing for the back half of 2026. - Adjusted EBITDA guidance was lowered to a range of $78 million to $84 million to account for near-term margin pressure from softness in end markets and Pioneer Power's current lower margin profile. - Key underlying guidance assumptions for full-year 2026: 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%, total gross margin of 23% to 24%, and SG&A as a percentage of total revenue of 15% to 16%. - The full-year 2026 expectation for free cash flow conversion remains unchanged: management still expects to convert at least 75% of adjusted EBITDA to free cash flow, with full-year capital expenditure expected to hit a run rate of approximately $5 million. - Management confirmed that 2026 represents a guidance reset to reflect current market conditions, with the goal of building a more resilient business model heading into 2027.

Segment performance

Lindbach operates two core business segments: Owner Direct Revenue (ODR) and General Contractor Revenue (GCR). - ODR Segment: Total ODR revenue for Q2 2026 was $128.4 million, growing 17.9% year-over-year (YoY). Acquisition-related ODR revenue rose 21.3% YoY, while organic ODR revenue decreased 3.4% YoY. ODR contributed 74% of total company revenue in the quarter. ODR gross profit decreased 2.6% ($0.8 million) YoY to $30.8 million, with ODR gross margin of 24% down from 29% in Q2 2025. - GCR Segment: Total GCR revenue for Q2 2026 was $45 million, growing 12% YoY, with acquisition-related GCR revenue increasing 23.3% YoY and organic GCR revenue increasing 12% YoY. GCR contributed 26% of total company revenue. GCR gross profit decreased 20.7% ($1.7 million) YoY to $6.5 million, with GCR gross margin of 14.5% down from 24.7% in Q2 2025. Total company revenue for Q2 2026 was $173.5 million, up from $142.2 million in Q2 2025. The $30.9 million revenue contribution from the acquired Pioneer Power drove most of the total revenue increase. Total gross profit was $37.3 million, down 6.4% YoY, with a total gross margin of 21.5% (down from 28% YoY).

Risks & headwinds

- Near-term softness and elevated price sensitivity in healthcare and institutional markets is pressuring gross margins and creating short-term performance headwinds. - Project timing delays have suppressed near-term gross margins, particularly for the GCR segment, as the business rebuilt backlog after completing a large volume of projects at the end of 2025. Margin improvement from delayed projects is not expected to fully materialize until 2027 in many cases. - Competition for skilled labor and construction materials in the high-growth data center market is putting upward pressure on costs and pressuring margins. - Pioneer Power's current margin profile is below the company average, and while improvement initiatives are underway, it will take 2-3 years for its margins to reach the company average. - Smaller acquired targets like Simcor may face staffing constraints that limit near-term growth, requiring capital and recruitment investment from Lindbach to unlock full potential. - All acquisitions carry integration risk, and while Pioneer Power is performing in line with expectations, integration execution could deviate from planned timelines.

Analyst Q&A

• Q: With softness in healthcare driving lower ODR organic revenue guidance for 2026, will this weakness carry over to 2027, and what is the current market dynamic for healthcare and industrial end markets? /

  A: Strong bookings over the past three quarters (totaling $660 million) give management confidence in the overall 2026 guidance. While healthcare and institutional markets face ongoing price sensitivity and delayed decision-making, Lindbach continues to gain market share and win bookings. Management expects current strong booking momentum to carry over and drive a strong start to 2027. Industrial demand remains healthy, complementing the company's data center growth strategy.

• Q: GCR gross margins were unexpectedly low this quarter. Is this a temporary dynamic, or a strategic choice to accept lower-margin data center work to build expertise in the vertical, aligned with the Simcor acquisition? /

  A: The low GCR margin this quarter is overwhelmingly a timing issue: Lindbach completed most GCR projects at the end of 2025, leading to a low backlog and slow project start pace in the first half of 2026. GCR backlog has now doubled from its Q2 end level. While the company remains focused on ODR work, some GCR exposure is normal, and gaining greater data center penetration will improve long-term revenue growth, absorb fixed costs, and improve overall margins. There is no intentional strategic shift to lower-margin work.

• Q: How does the Simcor acquisition create pull-through opportunities for Lindbach, and what is the geographic footprint of Simcor's business? /

  A: Simcor engages customers extremely early in the data center development process, often during initial real estate and budget planning, giving Lindbach visibility and the ability to influence project scoping early. This early engagement mirrors the pull-through dynamic Lindbach has already leveraged successfully in healthcare: $3 million in annual professional service revenue pulls through $60 million in project bookings. Simcor already has a presence in high-growth, underpenetrated markets for Lindbach including Texas, Atlanta, Charlotte, and Northern Virginia, creating opportunities for future geographic expansion in addition to immediate pull-through of fabrication and project work.

• Q: GCR margins were weak this quarter. Was this driven by execution issues on specific projects or broader market factors, and what is the expected long-term mix between ODR and GCR? /

  A: Weak GCR margins were entirely driven by project timing, not poor execution or underperformance on individual projects. After clearing out a large backlog of projects at the end of 2025, the segment needed time to rebuild backlog and start new projects, which suppresses near-term margins. GCR backlog has now doubled from its end-Q2 level. Management expects the long-term revenue mix to stabilize with ODR accounting for 70% to 80% of total revenue, a minor adjustment from the prior 75% to 80% range that reflects the company's current market position.