Core Insights - 1 Main Capital's fourth-quarter 2025 investor letter reported a net return of 3.4%, outperforming the S&P 500 and Russell 2000 indexes, which returned 2.7% and 2.2%, respectively [1] - Since inception, the Fund has achieved an annualized return of 20.8%, significantly higher than the indexes' returns of 13.7% and 7.3% [1] - The Fund aims for strong long-term performance while minimizing excess risk, with steady progress in portfolio performance since inception [1] Company Insights: Limbach Holdings, Inc. (NASDAQ:LMB) - Limbach Holdings, Inc. is a US-based building systems solution company, with a one-month return of 5.18% and a 52-week loss of 10.84% [2] - As of January 26, 2026, Limbach Holdings, Inc. shares closed at $82.18, with a market capitalization of $955.492 million [2] - Limbach Holdings was the top contributor to the Fund in 2020 and 2023, and has been a lucrative investment since inception [3] - The Fund significantly increased its position in Limbach Holdings after a 55% decline from its 2025 high, attributed to concerns over a temporary demand slowdown due to government shutdown uncertainties [3] - Limbach Holdings is not among the 30 most popular stocks among hedge funds, with 23 hedge fund portfolios holding the stock at the end of Q3, up from 19 in the previous quarter [4] - While Limbach Holdings is recognized for its potential, the Fund suggests that certain AI stocks may offer greater upside potential with less downside risk [4]

Summary of Limbach Holdings Conference Call Company Overview - Limbach Holdings is a building systems solutions firm that partners with building owners and facility managers to maintain critical mechanical, electrical, and plumbing (MEP) infrastructure [1][2] - The company operates in two segments: Owner-Direct Relationships (ODR) and General Contractor Relationships (GCR) [1][9] - Limbach has approximately 21 locations and 1,700 team members, utilizing a standardized platform for operations [2] Core Business Model - Limbach focuses on proactive sales, emphasizing long-term relationships with customers rather than short-term revenue maximization [4][22] - The company operates in six vertical markets: healthcare, industrial manufacturing, data centers, life sciences, higher education, and cultural entertainment [3][5] - Limbach aims to provide tailored solutions that ensure critical infrastructure operates efficiently, particularly in environments where temperature, humidity, and air quality are vital [3][4] Financial Performance and Strategy - The company reported that approximately one-third of ODR revenue comes from quick-burning work, while two-thirds is project-based with an average project size of $245,000 [9] - GCR projects are typically larger, averaging $2 million, but are more cyclical and competitive [10] - Limbach's strategic focus is on shifting revenue towards ODR, expanding margins through evolved offerings, and scaling through acquisitions [10][20] Market Dynamics - The competitive landscape includes OEM firms, contractors, and consulting firms, with Limbach positioning itself as system-agnostic and a one-stop shop for MEP solutions [7][8] - The company has seen stable demand across its verticals, with a focus on long-term relationships that can withstand short-term disruptions [5][22] - The healthcare and industrial manufacturing sectors have been identified as having the most penetration due to their critical infrastructure needs [23][24] Acquisition Strategy - Limbach has pursued both tuck-in acquisitions and geographic expansions, with a focus on companies that align with its long-term vision and customer base [18][19] - The recent acquisition of Pioneer Power Group is expected to enhance margins and expand capabilities in the industrial manufacturing sector [19][35] - The company aims to integrate acquired firms into its operational platform to drive value and improve margins over time [36][38] Future Outlook - Limbach is optimistic about growth opportunities, particularly in expanding its footprint and enhancing service offerings [21][43] - The company is focused on building a proactive sales team to enhance customer relationships and drive long-term value [39][42] - There is a belief that the market is still in the early stages of development, with significant potential for growth in both ODR and GCR segments [21][43] Key Metrics - Gross margins for ODR in 2024 were reported at 31.2%, significantly higher than GCR margins [34] - The company aims to improve margins for acquired firms like Pioneer Power, which currently operate below Limbach's average [35][36] Conclusion - Limbach Holdings presents a differentiated business model focused on long-term customer relationships and critical infrastructure maintenance, with a strategic emphasis on acquisitions and market expansion [43]

Core Viewpoint - Limbach Holdings, Inc. has appointed Nick Angerosa as Executive Vice President, National Customer Solutions, and Jay Sharp as Executive Vice President, Sales, effective January 13, 2026, to support its long-term growth strategy and enhance its position as a trusted building solutions provider [1][2]. Leadership Appointments - The appointment of Angerosa formalizes Limbach's focus on national account opportunities, aiming to improve consistency and increase lifetime customer value by integrating service and product offerings [2][3]. - Sharp will oversee Limbach's overall sales strategy and ensure alignment of selling resources with markets that offer higher returns, driving long-term business growth [4][5]. Company Strategy - Limbach aims to expand its data center and industrial and manufacturing verticals, transitioning towards proactive, consultative partnerships to serve both national and local customers [2]. - The company emphasizes deploying talent and capital where it generates the greatest risk-adjusted returns, reinforcing its commitment to delivering durable value for customers [2]. Company Overview - Limbach is a building systems solutions firm that partners with building owners and facilities managers, focusing on mission-critical mechanical, electrical, and plumbing infrastructure [6]. - The company operates primarily in six vertical markets: healthcare, industrial and manufacturing, data centers, life science, higher education, and cultural and entertainment, with approximately 1,700 team members across 21 offices in the eastern United States [6].

Core Insights - The Wasatch Micro-Cap Fund reported a return of 9.52% in Q3 2025, underperforming the benchmark Russell Microcap® Growth Index, which returned 19.93% [1] Company Performance - Limbach Holdings, Inc. (NASDAQ:LMB) had a one-month return of 19.88% but experienced a 10.91% decline over the past 52 weeks, closing at $79.03 per share with a market capitalization of $918.809 million on December 17, 2025 [2] - Limbach Holdings was a leading detractor from the fund's performance due to poor communication regarding earnings guidance from a recent acquisition and organic growth outlook [3] Strategic Shifts - Limbach Holdings is shifting its business model from working with general contractors to establishing direct relationships with building owners, which is expected to be more profitable and stable [3] Market Sentiment - The market's negative reaction to Limbach's guidance was viewed as overstated, and the fund maintains a positive long-term outlook on the stock, having increased its position [3] - Limbach Holdings was held by 23 hedge fund portfolios at the end of Q3, an increase from 19 in the previous quarter, indicating growing interest despite its challenges [4]

Core Viewpoint - Limbach Holdings, Inc. (LMB) is transitioning from a low-margin contractor model to a higher-margin building systems partner model, indicating a positive shift in its business strategy [1]. Company Summary - Limbach Holdings is focusing on enhancing its profit margins by moving away from low-margin contracting activities [1]. - The company is positioning itself as a building systems partner, which is expected to yield better financial performance [1]. Industry Context - The shift in business model reflects broader trends in the construction and building systems industry, where companies are increasingly seeking higher-margin opportunities [1].

Core Insights - Artificial intelligence (AI) is identified as the greatest investment opportunity of the current era, with a strong emphasis on the urgency to invest now [1][13] - The energy demands of AI technologies are significant, with data centers consuming as much energy as small cities, leading to concerns about power grid capacity and rising electricity prices [2][3] Investment Opportunity - A specific company is highlighted as a critical player in the AI energy sector, owning essential energy infrastructure assets that are poised to benefit from the increasing energy demands of AI [3][7] - This company is not a chipmaker or cloud platform but is positioned as a "toll booth" operator in the AI energy boom, collecting fees from energy exports and benefiting from the onshoring trend driven by tariffs [5][6] Financial Position - The company is noted for being debt-free and holding a significant cash reserve, amounting to nearly one-third of its market capitalization, which positions it favorably compared to other energy firms burdened by debt [8][10] - It also has a substantial equity stake in another AI-related company, providing investors with indirect exposure to multiple growth opportunities without the associated premium costs [9] Market Trends - The company is strategically aligned with several market trends, including the AI infrastructure supercycle, the surge in U.S. LNG exports, and the focus on nuclear energy as a clean power source [14] - The influx of talent into the AI sector is expected to drive continuous innovation and advancements, making investments in AI a strategic move for future growth [12] Valuation and Potential Returns - The company is trading at less than 7 times earnings, which is considered exceptionally low for a business involved in both AI and energy sectors, indicating significant upside potential [10][11] - There is a projection of potential returns exceeding 100% within 12 to 24 months, making it an attractive investment opportunity [15]

Core Thesis - Limbach Holdings, Inc. is experiencing a significant stock price increase, rising from $4 in 2019 to over $110, driven by favorable construction cycles and a shift towards owner-direct relationships (ODR) [2] - The market may be overestimating the defensiveness and durability of ODR-driven growth, which now constitutes 70% of revenue [3] Revenue and Growth Analysis - ODR revenue primarily consists of large discretionary retrofit and upgrade projects rather than recurring maintenance, making it vulnerable to the weakening non-residential construction cycle [3] - ODR orders have shown a decline, falling from +33% in Q1 2025 to -8% in Q2, while GCR orders dropped by 55%, indicating a contraction in demand [3] - Historical growth rates of ODR, which averaged a 20% organic CAGR, were significantly influenced by a strong industry upcycle and may not be sustainable moving forward [4] Future Outlook - Sustainable growth is expected to align with mid-single-digit trends in non-residential construction, with limited margin expansion anticipated after a period of favorable pricing conditions [5] - Current margins are near industry ceilings, and with rising competitive pressures, Limbach's true earnings potential is likely lower than market expectations, suggesting a fair value estimate of $58 per share [5]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $184.6 million, a 37.8% increase from $133.9 million in Q3 2024 [30] - ODR revenue grew 52% to $141.4 million, with 39.8% from acquisitions and 12.2% organic growth [30] - GCR revenue increased 5.6% to $43.2 million, with a 25.1% growth from acquisitions but a 19.5% organic revenue decrease [30] - Total gross profit rose 23.7% from $36.1 million to $44.7 million, while total gross margin decreased to 24.2% from 27% [31] - Net income increased 17.4% from $7.5 million to $8.8 million, with adjusted earnings per diluted share growing 15.4% from $0.91 to $1.05 [33] Business Line Data and Key Metrics Changes - ODR revenue accounted for 76.6% of total revenue in Q3 2025, up from 69.4% in Q3 2024 [30] - ODR gross profit comprised approximately 80% of total gross profit dollars, increasing by $6 million or 20.3% [31] - GCR gross profit increased by $2.5 million or 39.3%, driven by higher margins of 20.8% compared to 15.8% [32] Market Data and Key Metrics Changes - In the healthcare sector, spending patterns are normalizing, with a national healthcare owner engaging the company for $12 million in capital projects across four sites [19] - The industrial and manufacturing markets continue to see seasonal shutdowns and facility upgrades, benefiting the company’s local business models [20] - The life science and higher education markets have shown cautious spending, but clients are beginning to communicate anticipated needs for the coming year [21] Company Strategy and Development Direction - The company’s growth strategy is focused on three pillars: scaling owner-direct relationships, enhancing profitability through expanded offerings, and strategic M&A [5][7] - The shift towards owner-direct relationships has diversified revenue streams and reduced risk, with ODR revenue expected to remain between 70%-80% of total revenue [12] - The company aims to improve margins through proactive sales teams and operational enhancements post-acquisition [16][18] Management's Comments on Operating Environment and Future Outlook - Management noted that while some customers experienced temporary delays in capital spending, spending patterns are normalizing as the year progresses [19] - The company is reaffirming its 2025 guidance of total revenue between $650 million and $680 million, with adjusted EBITDA of $80 million to $86 million [27] - Total organic revenue growth is expected to be in the range of 7-10%, down from previous expectations of 10-15% [28] Other Important Information - The company has made significant investments in building its sales team, which has resulted in higher SG&A relative to peers, but is expected to yield results [23] - The company’s balance sheet remains strong, with total liquidity of $70.3 million as of September 30 [35] Q&A Session Summary Question: Revenue contribution from Pioneer Power - Management indicated that Pioneer Power is expected to contribute closer to $60 million for the second half of 2025, primarily from the industrial segment [37][38] Question: Gross margins within ODR segment - Management acknowledged that gross margins are currently lower due to the nature of work and the transition of Pioneer Power, but they see opportunities for improvement [39][40] Question: SG&A as a percentage of revenue - Management noted that while SG&A as a percentage of revenue has decreased, there will be necessary investments going into 2026 [41] Question: Organic growth expectations - Management confirmed that organic ODR growth year-to-date is 14.4%, with expectations for acceleration in Q4 due to budget spending [43][44] Question: Future visibility in ODR - Management expressed confidence in visibility for ODR, emphasizing the mix of quick-burning work and fixed-price projects [55][56] Question: National relationship development - Management highlighted the progress made in building national relationships, noting that trust has been established with larger clients [57][58]

Company Overview - Limbach specializes in revitalizing and maintaining mission-critical systems in existing facilities [6] - The company operates in six distinct vertical markets across 17 Metropolitan Statistical Areas [19] - Limbach combines engineering expertise with skilled craftsmanship to deliver integrated solutions [16] Financial Performance and Strategy - Limbach is shifting its revenue mix towards Owner Direct Relationships (ODR), targeting ~80% ODR revenue [31] - Gross Margin has expanded nearly 1,480 bps from FY 2019 to FY 2024, reaching 27.8% [32] - Adjusted EBITDA Margin has increased more than 4x from 3.0% to 12.3% over the period from FY 2019 – FY 2024 [32] - The company's 2025 guidance projects total revenue between $650 million and $680 million, with ODR revenue accounting for 70% to 80% of the mix [68] - 2025 Adjusted EBITDA is projected to be $80 million to $86 million, with an Adjusted EBITDA Margin of 12% to 13% [68] Acquisitions and Growth - Limbach aims to add $8 million to $10 million of Adjusted EBITDA on a full-year basis through strategic acquisitions [49] - Pioneer Power Inc (PPI) is expected to contribute annualized revenue of approximately $120 million and Adjusted EBITDA of $10 million beginning in 2026 [58] - Consolidated Mechanical is expected to contribute annualized revenue of approximately $23 million beginning in 2025, and EBITDA of $4 million per annum [63]

Company Performance - Limbach reported quarterly earnings of $1.05 per share, missing the Zacks Consensus Estimate of $1.09 per share, but showing an increase from $0.62 per share a year ago, representing an earnings surprise of -3.67% [1] - The company posted revenues of $184.58 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.07%, and up from $133.92 million year-over-year [2] - Over the last four quarters, Limbach has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Future Outlook - The current consensus EPS estimate for the coming quarter is $1.30 on revenues of $199.65 million, and for the current fiscal year, it is $4.43 on revenues of $659.43 million [7] - The estimate revisions trend for Limbach was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - Limbach operates within the Zacks Building Products - Miscellaneous industry, which is currently ranked in the bottom 39% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Limbach's stock performance [5]