Q2 2022 EMCOR Group Inc Earnings Call

Yes.

[music].

Good morning, My name is Andrea and I will be your conference operator today.

At this time I would like to welcome everyone to the EM core groups second quarter 2022 earnings call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

If you would like to withdraw your question. Please press star number two.

Please note this event is being recorded.

Mr. Brad Newman with F. T I consulting you may begin.

Thank you Andrea and good morning.

Welcome to the EMCORE Group Conference call.

Here today to discuss the company's 2022 second quarter results, which were reported this morning, I would like to turn the call over to Kevin Matz Executive Vice President of shared services, who will introduce management Kevin. Please go ahead.

Thanks, Brad.

As always thanks for your core and welcome to our earnings for the second quarter for.

For those of you who are accessing the call via the Internet and our website welcome as well and we hope arrived at the beginning of our slide presentation that will however market today.

Tied to this.

This presentation and discussion contains forward looking statements and may contain certain non-GAAP financial information page two of our presentation describes in detail. The forward looking statements and the non-GAAP financial information disclosures I encourage everyone to review both disclosures in conjunction with our discussion and accompanying slides.

On slide three we had the executives who are with me to discuss the quarter and six months.

They are Tony Guzzi, our chairman, President and Chief Executive Officer, Mark Pompa, Executive Vice President and Chief Financial Officer, and our Vice President and General Counsel Maxine Mauricio for call.

So thats not accessing the conference call via the Internet. This presentation slides will be archived in the Investor Relations section of our website under presentations and you can always find us at EMCORE group Dot com with that out of the way. Please let me turn the call over to Tony Tony Yes. Thanks, Good morning to everybody and thanks for your noncore.

My initial comments will focus on pages four through six of the presentation. We had a strong second quarter at EMCORE with revenues of $2 7 billion and diluted earnings per share of $1 99.

We delivered overall quarterly revenue growth of 11, 1% with organic revenue growth of nine point something.

We had operating income margins of 5%, which is especially strong with considering the headwinds we faced with supply chain issues.

We generated quarterly operating cash flow of $77 million and exited the quarter with very strong remaining performance obligations or <unk> of $6 5 billion, which represent nearly 27% growth from the year ago period, and 15% from year end 2021, we.

Remain committed to our capital allocation strategy, returning a record $458 million cash to our shareholders through June 32020, and a volatile operating environment. Our team has a resilience and flexibility as we continue to drive successful results for our customers and our business.

Forward momentum this quarter was driven by two key factors.

We are seeing strong demand for our specialty contracting construct versus across a variety of sectors, where we can differentiate ourselves such as health care water and waste.

Commercial and industrial Slash manufacturing, we also continue to see strong forward demand for our data center and high Tech maybe shrink construction services.

The segment's reported combined operating income margin of six 9% in the quarter.

Our mechanical construction segment operating income margins were a strong seven 2% and electrical construction segment operating income margin rebounded to a much improved six 2% versus our first quarter performance.

Performance in both side continues to be impacted by ongoing supply chain issues related to equipment lead times and deliveries and most of these issues that impacted our remarks were from projects, we booked over two to three years ago prior to the emergence of inflationary.

Jane challenges.

Every day, we are making improvements to our planning.

Ken.

And workforce scheduling that better position us to navigate volatile supply chain environment. It remains as difficult as it was in the first quarter.

How is proving useful as we work with our suppliers.

I was moving and obtain the most comprehensive delivery mission possible.

In the United States building services segment, we faced.

Ongoing supply chain issues as in the two segments with respect to our project work, where we have record <unk> <unk> projects and where the growth goes.

It was more than 20% on a year over year basis.

Our results are being driven to a large extent very strong growth for our HVAC repair service, our highest margin product line in the U S building services segment. This strong repair service growth makes sense as we are not able to execute some equipment replacement work because a very extended lead times for the <unk>.

<unk> equipment, if our customers cannot replace aging inefficient equipment.

Support for them. We also performed very well in our commercial site based business will continue to provide stable performance through excellent execution Smart account selection.

Industrial services segment is performing about how we expected on a year to date basis, we execute turnaround services as anticipated.

They need to seek communities to improve operating margins.

Manish, but our customers are under considerable pressure to keep their facilities operating at what is extraordinarily high utilization or United Kingdom building services segment continues to deliver steady performance and continues to serve some of the most important and sophisticated customers in sectors in the UK.

Before I turn.

It over to Mark I, just want to emphasize the following a record return of cash to shareholders. We left the second quarter with a strong balance sheet. This strong balance sheet serves as an important catalyst to win work for some of our most sophisticated customers executing large and complex projects record <unk> of $6 5 billion is a testament to.

Not only our execution, but also our financial strength with that I will now turn the presentation over to Mark for a detailed discussion of our financial results. Thank.

Thank you Tony and good morning to everyone participating today.

For those accessing this presentation.

Now on slide seven.

As Tony indicated over the next several slides I will supplement Tony's opening commentary on <unk> second quarter performance as well as provide a brief update on our year to date results through pretty.

All financial information referenced this morning is derived from our consolidated financial statements.

Both our earnings release announcement and Form 10-Q filed with the Securities and Exchange Commission earlier. This morning, so, let's revisit and expand overview of <unk> second quarter performance.

Consolidated revenues of $2 71 billion are up $269 7 million or 11, 1% over quarter. Two 2021, our second quarter results include $33 7 million of revenues attributable to businesses acquired pertaining to the such businesses were not owned by <unk> in last year's second quarter Act.

<unk> revenues positively impacted our United Electrical construction segment within the second quarter.

Before reviewing the operating results of our individual segments I would like to highlight that our $2. Seven 1 billion of quarterly revenues represents a new all time quarterly revenue record for the company. Despite the <unk>.

In the United Kingdom building services segment revenues, which was largely due to unfavorable foreign exchange rate movements. The specifics for each of our reportable segments are as follows United States Electrical construction segment revenues of $64 1 million increased $72 million or 14, 6% from 2021 comparable quarter.

Excluding incremental acquisition revenues. This segment's revenues grew organically, 7% quarter over quarter.

Increased project activity within the commercial market sector inclusive of the telecommunications and high tech sub market sectors as well as growth in each of the healthcare manufacturing and water and wastewater market sectors were the primary driver.

Of the period over period improvement.

Partially offsetting these increases was a decline in revenues from the institutional market sector due to the completion or substantial completion of certain projects performed in the corresponding 2021 period.

United States mechanical construction segment revenues of $1 $66 million increased $97 million or 10, 1% from quarter two 2021.

Revenue growth during the quarter was derived strictly from organic activities within the majority of the market sectors, we serve the manufacturing water and wastewater and institutional market sector is experiencing the most significant period over period increases.

We also continue to see revenue growth within the commercial.

Market sector, driven by demand from customers within the semiconductor and life Sciences industries.

Second revenues for <unk> combined United States construction businesses of $1 63 billion increased $169 7 million or 11, 6% from quarter two 2021.

The United States services quarterly revenues of $677 8 million in the $6 million or 10, 8% revenue growth was generated within the segments commercial site based and mechanical services divisions with respect to commercial site based activity.

<unk> additions and scope of our site expansion with existing customers, where the drivers of the quarterly increase in revenues within mechanical services, we have seen a continuation of the trends that existed in quarter, one, notably we have experienced an increase in service repair and maintenance volumes, partially or supply chain delays have resulted in the need to extend.

The useful lives of HVAC equipment and instances when new equipment is not readily available. In addition, there continues to be a heightened for building one and then control.

With an emphasis on improving building efficiency energy consumption and indoor air quality.

The industrial services segment revenues of $284 5 million increased $49 3 million a 1% revenue segment have grown in comparison for the comparable period for each of the last four quarters. We are some stabilization in demand for our downstream for downstream focused services. This.

Recent field services with some other tenants.

Spring turnarounds as well as greater maintenance and capital project activity. This growth is despite the headwinds within the upstream and midstream energy sectors, which is impacting certain of our service lines. We are also seeing an increase in shop services revenues for new equipment as.

As well as pull through repair projects, resulting from ongoing turnarounds with refinery utilization levels in excess of 90%. We remain hopeful that the last six months of 2022 will provide market that can perpetuate this segment's recent trend of improving results.

United Kingdom building services revenues of $114 million decreased $15 $3 million. This revenue contract was predominantly attributable to unfavorable exchange rate movements of $12 5 million a quarter, excluding the impact of foreign exchange.

Growth in project activity within this segment was more than offset by a reduction in service contract revenues due to the loss of certain contracts not successfully attained a rebid. Please.

Please turn to slide eight.

Selling general and administrative expenses of $245 4 million represent nine 1%.

The increase of $2 4 million from quarter 2021.

And for incremental expenses attributable to companies acquired a $3 $1 million inclusive of intangible asset amortization.

SG&A expenses for the quarter declined slightly on an organic basis.

As a reminder, 2021 second quarter included a $4 1 million provision for credit loss within our U S. Industrial services segment related to a customer bankruptcy.

Our credit loss activity in the current year second quarter is substantially less contributing to the period over period organic SG&A decline.

Despite adding personnel to support strong organic revenue growth in travel and entertainment expenses continuing to trend higher as bits of resumes that cadence we have been successfully leverage our cost structure, resulting in a reduction in our SG&A margin. We continue to remain disciplined with overhead investment and we will seek.

<unk> and economies of scale as we drive future revenue growth.

Reported operating income quarter of $137 6 million.

Favorably compares to $133 four.

And similar to our second quarter.

Quarter, two operating margins of five 1%.

At this point from 2021 quarter and is largely due to a less favorable revenue mix within our U S. Construction operations, which I will cover in my segment comments.

As a reminder, our second quarter 2021 consolidated operating margin of five 5% represented a quarter to record.

Specific quarterly operating performance by reporting segment is as follows.

Operating income of our U S. Electrical construction services segment of $35 1 million decreased seven nine and from the comparable 2021 period.

<unk> operates in a $6 that represents a reduction from the eight 7% in last year's second quarter.

The decrease in both operating income and operating margin is due to a less favorable project mix within the commercial institutional and transportation market sectors when compared to the three year period. In addition, we did experience certain discrete project write downs this quarter that reduced this segment's operating income by $7 million these losses negatively the.

Electrical construction quarter to operating margin by 140 basis points.

Further while from quarter, one we continued to experience labor productivity and efficiency challenges due to supply chain difficulties, resulting in equipment delivery delays, which has impacted project timelines. Although this segment continues to lag 2020 performance. We are reporting substantial sequential improvement in both margin and operating <unk>.

Dollars when compared to the first quarter of this year.

Second operating income of our U S. Mechanical construction segment of $56 9 million was essentially flat with the comparable 2021 period.

Reported operating margin of seven 2% represents a 70 basis point reduction from the seven 9% earned a year ago as referenced during the last two quarters. Our mechanical construction segment has a larger number of active projects within the manufacturing and water.

Wastewater market sectors, where we are either acting as a construction manager or general contractor.

This is the percentage of our self perform labor is less than a typical mechanical construction project, thereby resulting core gross margin profile.

This segment. Additionally, experienced certain project write downs during the quarter, which negatively impact operating margin by 40 basis points.

Consistent with our electrical construction this quarterly.

U S. Mechanical construction sequentially improved both reported operating margin and operating income dollars from quarter one of them.

Operating let's building services to 38 million or five 6% of revenues, which represents a $5 $6 million increase in operating income in the three basis point improvement in operating margin.

Operating performance within the segments Mechanical services Division, both favorable project execution as well as the impact of certain price adjustments aimed at better aligning our billing rates with the increased costs. We have experienced were the key drivers of this segment's increases in operating income and operating income margin.

Our U S industrial services segments operating $6 5 million represents a $7 million improvement from the 200 dollar operating loss reported in 2021 second quarter. This is our industrial segment's third consecutive or operating profit.

Since reporting periods prior to the pandemic, albeit on operating but remained lower than historical levels as we continue to battle the competitive pricing environment.

And a higher and higher cost.

<unk> headwinds on a positive note anticipated jets are either recurring or scheduled to commence during the remainder of 2022 in line with our initial planning expectations.

K building services operating income of $6 4 million or five 6% of revenues represents a slight decrease from the quarter of 2000 Q1 due to the unfavorable exchange rates for the pound Sterling versus the United States dollar we continue to experience strong project demand within this segment as our customer base advanced capital investment program.

<unk>, which is contributing to the 20 basis points of operating margin expansion per year.

We are now on slide nine.

Additional financial items of significance for the quarter not in the previous slides are as follows quarter. Two gross profit of $383 million is higher than the comparable 2021.

By $6 $7 million or just under 2%, However, gross margin of $14 <unk>.

Is lower than last years second quarter due to the reasons covered during my operating commentary, including project mix supply chain difficulties and construction project write down.

Incremental revenues helped us achieve a new second quarter gross profit record, but prevailing macroeconomic headwinds are hindering our ability maximize profit conversion.

Diluted earnings per common share in the second quarter of 2022 is $1 99.

As compared to $1 78 per diluted share for the prior year period. This second quarter EPS performance represented quarterly earnings per share record due to a combination of greater net income and a reduction in our weighted average shares.

Given <unk> share repurchase activity.

Please turn to slide 10.

With the quarterly commentary complete I will touch on highlights with respect to <unk> results for the first six months of 2022 revenues of $5 3 billion, an increase of $558 million or 11, 8%.

10% was generated organically operating income of $237 6 million or four 5% of revenues represents a five 1% reduction from the results for the first six months of 2021 as our improved second quarter 2022 performance was not enough to offset both start in quarter, one with <unk>.

Increased share repurchase activity and corresponding reduction in shares outstanding today.

Diluted earnings per share of $3 36.

Eclipses that of the prior year to $3 32.

To slide 11.

Aided by the strength of our balance sheet <unk> remains in a position to invest in our business with.

Capital to shareholders.

Good against our strategic objectives, our cash on hand has declined from year end 2021 levels as we have allocated at $454.

Towards the repurchase of our common stock during the first months of calendar 2022.

Approximately $272 5 million of this amount was up during the second.

As equity market volatility continued due to inflationary and interest rates.

The midpoint of this year.

And then doubled our previous high for share repurchases.

Our cash to shareholders.

Our quarterly dividend, which amounted to $13 million during the year to date period has been constant when evaluating the working capital investment necessary to sustain our strong organic revenue growth as well as our future opportunities. In addition to tight for both capital and strategic investments in addition to our share repurchase and dividend active.

<unk> additional fact for the period over period decline in our reported cash balance include $26 $6 million in payments for acquisitions and $27 7 million in capital expenditures. In addition to cash other movements in our balance sheet of note are as follows working capital.

Nearly $307 million the decrease in cash disrupt rinsed, coupled with an increase in our net contract liability position was partially offset by an increase in accounts receivable given the revenue growth. During the period goodwill has increased marginally since December of last year, given the acquisitions completed by us thus far in 2022 <unk>.

<unk> intangible assets have decreased by approximately $12 million. During 2022 was amortization expense is more than offset the additional intangible assets recognized in connection with our year to date acquisition activity total debt exclusive exclusive of operating lease.

<unk> remains fairly consistent with that as of December and <unk> debt to capitalization ratio has increased from 10, 4% at year end, 2021% to 11, 8% at June 32022, given the reduction in our shareholders' equity, resulting from our share repurchase activity during the six months.

To pick up from both Tony and my earlier comments <unk> remains committed to our capital allocation strategy is that by both our share repurchase activity to date as well as todays announcement that our board has approved an additional $500 million authorization under our share repurchase program.

An increase in our dividend of approximately 15% with my proportion of this mornings slide patient complete I will now return the call back to Tony Tony Thanks, Mark and I'm going to be on page 12 remaining performance obligations by segment and market sector much.

Much like last quarter, the second quarter was another strong project bookings quarter for the company.

We continue to expect experienced core demand across all our segments and many of our market sectors.

Total company <unk> at the end of the second for $6 2 million.

And or 25% over June 32021, total of $5 1 billion.

Measuring from the end of 2021, RP odor up 862 million, thus far this year or a strong 15, 4%. Additionally, second quarter project bookings are likewise strong buy and by an increase of <unk> $508 million from this year's first quarter.

All almost all of the <unk> increase this quarter was organic.

Growth was broad based with each of the five segments growing arpaio totals from both a year ago and year end 2021 periods.

We are positioned in active nonresidential market sectors and continue to see velocity in our business. The one two punch we highlighted in our first quarter call continued this quarter, where we experienced both strong revenue growth and total RPM growth, while <unk> growth, thus far can be attributed in costs due to outside factors.

We continue to see an active bidding environment, despite current supply disruptions and inflation challenges.

Together, our domestic construction segments experienced strong.

<unk> growth year over year.

<unk>, increasing over $1 billion or 25% from June 2021 mechanical question.

Segments, our <unk> increased by 660.

Or 23%, while the electrical construction segment saw an increase of $350 million or nearly 30% since December 21, our domestic segment <unk> have increased over $600 million.

U S building services <unk> levels increased $328 million or 44% from the year ago quarter, and now has over $1 billion in quality project in service.

As I mentioned earlier extended lead times for HVAC equipment combined with a continued push for energy efficiency and improving building wellness is resulting in our customers asking us to retrofit and repair equipment. Additionally, strained equipment availability is driving our repair service, which is something.

Highest grow margin work that we do at Amcor move.

Moving to the side of the page, we show <unk> broken down by market.

Continuing a trend RPM growth pace in the second quarter was.

Most market sectors with <unk>, almost $1 $1.700 billion of which was booked at half of 2022 also moving to this $1 $1 billion increase where projects towards in the Hyperscale data Center high Tech semiconductor arena as well as projects within <unk>.

Life Sciences, and pharma businesses all of this shows the diversity and strength of <unk> end markets, finishing.

Finishing our sector <unk> growth year over year health care Rpms were up 10% institutional up 40% and short duration projects, which include much of the HVAC retrofit project work are up 26%.

Partially offsetting this was a reduction in transportation <unk> as while as minor decreases in water and wastewater and industrial and manufacturing.

From both a business segment end market perspective, I continue to like the balance and breadth of our Rps.

You got to go to my one of my favorite slides, which is page 13, and I'd like to turn there now and we can talk about why we remain optimistic about four.

For the future.

On this page you see well positioned and growing non residential market interest and I'm going to talk about each of these.

<unk> data centers and semiconductor fabrication and we had big news in the semiconductor front end EMCORE will benefit from that because we are working with all of those customers that will benefit.

We will see strong electrical mechanical and fire protection demand across all of those opportunities in semiconductors and <unk>.

Positioned well in Arizona, specifically mechanically we are positioned well across the entire <unk> will there'll be some.

<unk> projects done.

With fire protection and capability in Arizona, and burgeoning capability in Ohio, Ohio on the Dr. <unk> data centers.

It's trying to say I believe there are none better at mechanical and electrical construction within data centers than RF companies, we have leading positions in some core of geographical markets and we can build from an enterprise level right.

Two a hyperscale data center using 50 megawatts power.

Our folks are terrific and those teams and dine Portland and Salt Lake.

<unk> D C.

Gibson.

Forest these.

These people are well data center builders on the electrical side on the mechanical side, Bachelor and Kimball pulling Kent.

F N G are exceptional data center builders.

They know their work we're trusted by both our general cost.

Contract tumors.

And our.

One of our customers.

They come to us because we have great technical scale and they know that we have the financial strength to complete and finish those projects.

From a manufacturing side, we are very well positioned.

Mark talked about some of the ability to bring together a prime project.

Across a number of trades, especially for plant relocations.

We also are market leaders and food.

<unk> fabrication, if you go to that trade business.

There are none better than southern industrial contractors down in the southeast and they also move up into the lower Midwest and we not only help people fix their existing facilities, we help them upgrade where they are and they are hurt and moving and relocating equipment and building and manufacturing capacity our food <unk>.

Assessing expertise is owned through our shambaugh and Sun.

And we also across a fleet of things are.

We can do as much as electrical charging station work.

We need to be at the higher end of that and we do that exceptionally well health care, that's always been a core.

Core market for them.

We were integral and a lot of the things that had to happen with the pandemic to build extra capacity within our system and we are now part of the retrofit and expansion of not only hospital systems, but medical buildings in outpatient surgery centers.

Water and wastewater are market really for that for the most part we do electrical work in different parts around the country the bigger part of that work to mechanical.

The team down a point, Ken South and to some extent Harry Pepper are very good at that work and the <unk> team has had a leading position in both the east and West, Florida, and helping with the population recently consent decrees that have happened Eric <unk>.

Mechanical services, if we are the leading bureau within the top three are people that can provide mechanical services solutions and those solutions that we provide.

Not only provide efficiency they provide building of resiliency and they also now with the pandemic wellness has even become more.

The building efficiency is one of the major ways that.

You can drive carbon reduction.

That happening across our footprint right because as you increase the building wellness and increased outside are coming in you have to even seek more efficiency within the building because.

Actually acts to the detriment of building efficiency.

A wonderful for our people to meet our customers and for us to meet our.

Our carbon reduction goals that people there our client set.

And we do that also through control solutions fire protection there are none better.

And then.

The teams of Xiaomi.

Now.

To bring new.

Solutions to some of the most complex service and construction jobs and I'd be remiss not to say also are going to be big participants across our portfolio of projects not only renewables that carbon reduction and capture project.

We like our position that work for the most part is happening in our <unk> segment, a lot of it has been delayed and in our industrial segment.

Where they are.

Dissipate in solar projects and they also help within wind projects on the transmission side as does <unk> out in the inner mountain area for.

Of course participate in a lot of robust.

To go up and down a little bit, but the general trend of these markets that I. Just went through are up into the right. We spent a lot of time, putting the assets in place and we've got some of the best teams in the market doing against these opportunities.

I'm going to go to page 14, and 15, now and I'm going to close out this discussion and we will take your questions.

Entering this year, we knew that we would face some margin challenges we were all the way back in February 2021 talking about supply chain with our year end 'twenty call.

And we also knew that because of our product and project mix and you couple that with what we thought was happening with supply chain and Covid disruptions.

Our teams have done a great job getting these challenges in this operating environment and we are pleased with our current position.

Talked about demand for our services remains strong across most of our most important market sectors and in all of our reporting segments. As a result, we're going to update our guidance range.

We now believe that we will achieve $7 30 to $7 80 in earnings per diluted share and we expect at least $10 $8 billion in revenue.

Where we end up in that range I always sort of provide a roadmap of what could give you the ups or downs.

Where are we on that range will depend not only on our execution, but also equipment and materials.

We anticipate that we will continue to experience supply challenges we.

We do expect to converted operating operating income margins on 5% for the remainder of 2022.

Similar to what we achieved in the first half of the year, if we approve from margins due to better supply chain execution and improved productivity productivity, we could see even stronger results in the back half of the year.

How do you get there and what are the bankers that drive that.

We expect to continue to achieve favorable SG&A leverage as compared to 2021.

We expect to see strong project demand across key market sectors like industrial manufacturing healthcare and commercial which includes both data center and semi projects.

We expect demand to be strong across a range of project sizes and scopes.

We believe you'll continue to see very strong HVAC service repair service demand.

As trends, we observed this quarter continue through the third quarter.

Thus summer heat, we are seeing helps us.

With a more normalized fall turnaround season in our industrial services segment, with our oil and gas customers and our refining and petrochemical customers.

We should start executing some renewable energy projects that are delayed because of raw material availability.

While we are pleased with our current trajectory and optimistic about the balance of the year. We are also aware that we will continue to face headwinds in the near term.

Covid is still here and while we believe we have the systems in place to navigate mitigates its challenges and keep our workforce safe.

We expect this some project sites will be disrupted.

Further supply chain issues.

<unk> with a <unk> deliver the and pricing all challenges. This will continue in my estimation through the balance of 2022 into 2023.

Finally, with respect to challenges, we cannot ignore certainties and our macro environment.

Rising interest.

Tightening lending and energy.

Scarcity exacerbated by the conflict in Ukraine, and other policy matters.

Will cause issues to date as evidenced by our strong growth in <unk>. We believe we have the resilient market operated however, when the leaders of major financial institutions caution.

<unk> market conditions.

And we realize that it will likely.

We believe outlook are strong despite all of that.

As evidenced by our year to date performance and our record <unk> of $6 5 billion.

Our confidence in our us reflect capital allocation strategy as we have returned a record amount of cash to shareholders up 468.

Through June 32020.

We announced an increase in our dividend by approximately 15% or 8% per share per annum and our board has provided as Marc Dr. So our announcements and.

An additional $500 million in authorization for share repurchases, we will continue to take a balanced approach to cash management, considering all of the implications for maintaining and deploying funds moving.

Maintaining cash and a strong balance sheet for our <unk>, our investment in our and granted growth, which has been quite strong our acquisitions and our customer expectations for our financial strength. This approach to capital allocation has historically served us well, especially in periods of economic uncertainty.

To support our organic growth and we have a decent pipeline of acquisitions to invest in across our segments.

As always I'd like to thank you for your interest in EMCORE and I would like to especially thank all the members of our EMCORE team for their continued dedication hard work and execution for our customers and with that ill ask Andrea to the floor.

<unk> for your questions.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If you are using a speakerphone pick up your handset before Keith.

Your question. Please press star two.

At this time, we will pause now.

To assemble the roster.

And our first question will come from Sean Eastman of Keybanc capital markets. Please go ahead.

Hi, Tim.

David here.

Great update in.

Thanks for taking my questions.

First one.

Kind of more of a clarification question so.

You mentioned, how you really like the diversity and Rps, but of course per the disclosures. It shows over 45% of the mix is commercial.

None of the end markets, we're talking about are what I would really.

Think of it is commercial.

And that piece is growing and there is a lot bigger than it was in say 2007 2008, so can.

Can we just get some clarity on what that piece really is <unk>.

<unk> is growing and we I think we pointed it out in the commentary what's driving that growth is yet.

You have to go back historically, a why it ended up there right. Many many years ago. It wasn't a major part of our business and it was light manufacturing.

<unk> data systems now as a bigger part of the business, but it's it's it's data centers.

Driving the growth.

Hi Tech manufacturing in general and more of what we were.

We're doing just build out work, but now we're doing bigger work life Sciences pharma and other types of that kind of manufacturing and we still have pretty strong demand driving that growth as we talked about in building services. There is all commercial for the most part and that demand drives along.

Retrofit projects and most of those are typical commercial Shawn you're pointing out something it's grown as a bigger business.

It's what's driving that commercial backlog increase and that's why we took the time and our RP O section to talk about that Mark.

<unk> said.

For not to go for the reasons again as Tony just mentioned, but.

Included in our commercial <unk> disclosure or all those things that Tony just highlight it as a major growth areas and have been major contributors to our profitability over the last several years.

We are reticent to change out categorizing that midpoint in the year.

But it's something that we need to evaluate internally as we go forward to provide analytical.

Community I guess.

More written transparency transparency, we're already providing forward with regards to what.

It's actually represent.

Okay, I think that's really important so I appreciate that.

And then on the margins also just to clarify I think Tony I think you said you guys have built in a 5% operating margin for the second half I'm kind of struggling to get to the midpoint of the guidance would that number so maybe.

Maybe I heard that wrong.

And also just broadly in terms of thinking about the progression of margins. We saw this really nice sequential improvement from <unk>.

Maybe talk about that bridge.

And.

I would have thought that into the second half there would've been a lot of opportunity to continue to improve just in terms of some of the new construction construction work getting to later stages.

Driving a tailwind even if we're assuming the supply chain remains sort of staff.

Yes, so I'm going to kick this to market I mean broadly I set of around 5% and got it enter 20 basis points Youre right can move that.

Sean.

The most of our caution, saying that number is around the macro environment.

Supply chain.

Aye.

It's hard for me for today and tell you that.

The supply chain is all fixed and as clear selling.

Lead times are terrible.

Oems are routinely missing those terrible lead times.

And that has implications for us and so for us to sort of sit here and not caution that would be irresponsible I think and then a second.

Secondarily.

We have work that's now going to be starting that's favorable to our mix that should be further along than it is and we're not exactly sure.

A month means a lot when you startup a large project on equipment deliveries and most of those larger projects were in concert with our customers ordering that equipment. They are actually buying it ahead of time.

And we will start off when that equipment is there and that could be delayed it could start two weeks from now it can start four weeks from now to start six weeks from now in a market I think thats, where our caution is and then.

And obviously.

Sure Toni Toni is around 5% as it has indicated it could mean something in the low 5% range. So clearly as you do that as you did the math I'm showing you came out with operating margins of five 2% five 3% in the back half of the year.

So clearly no worse than they were in second quarter and significantly higher than they were in quarter, one and six.

Six months on a cumulative basis.

The variable there once again is the revenue number.

So that $10 8 billion of guided revenues ends up creeping up.

It's quite possible.

Same point at a five or five 1% margin.

<unk> for the last six months.

Okay. Good stuff guys, all really helpful I'll turn it over there.

The next question comes from Adam sale Hymer of Thompson Davis. Please go ahead.

Hey, good morning, guys. Congrats on a strong quarter and are well times buyback.

Okay. Thanks, Adam.

Hey talk about Rps or they because they're so strong are they at a level where.

Tony They are starting to give you some confidence in 2023.

Well you know, we don't give forward looking guidance, but the reality is.

I go back to.

Longer term trends and I'd go back to page 13 in our presentation and talk about those sectors and most of them will be up into the right Wi specifically know what will happen in three on the small project work no I don't do I know on what when New awards with no I don't but clearly our average project length is somewhere nine to 12.

Once some of these are longer term.

And we will see when they start up and then they finish again, we don't give forward guidance into 'twenty three.

And then.

Can we talk a little bit more about the electrical.

Write downs in those specific projects is there any.

Risk to those in the back half or does that does that margin hit that you took in Q1 and Q2, just just flip and go away for the back half.

Our business, we're always cautious to say write downs go away, we've had a hell of a run.

With that without any significant losses.

But our folks are working in unprecedented times, especially with respect to supply chain.

And most of the write downs, we had in the first half of the year. We're on projects. We took prior to this supply chain inflation cycle, but that being said.

There's a lot of moving pieces. So we actually I would just refer you back to the previous question on the 5% around 5% margin. We don't see anything are absolutely we would've taken it right. That's how this business works.

But we don't expect it.

We've taken it.

And our electrical business has a good mix of work and a lot of that margin progression to be dependent on our ability to start some of that favorable mix work.

We'll all be related to supply chain.

I'm going to into central jumped quickly so Tony's point, obviously to the extent that we've identified.

And necessity to take a write down we've taken 100% of it in the second quarter, but we can't defer to later periods is unsure of it Paul while now.

The only the only additional thing I will add to Tony's commentary.

These projects are still active projects.

So they create a little bit of margin headwind in that segment, because we're going to be recognizing profit on the remaining revenues.

At a margin profile lower than what this segment traditionally.

<unk>.

That's that's the negative aspect of it the fastback is is that with regard to <unk>.

That were written down both in electrical and mechanical.

Construction they are all over well over 50% complete some of them are even closer to 100% complete.

They are clearly not going to be the preponderance of revenues that are recognized in these segments as.

As we work through the last six months of 2022.

Almost led with that too because it's been eight years since I think I think it was.

2014 was the last time, we talked about our problem projects.

Great I'll turn it over to Adam.

And all in all fairness right. These are big giant project write downs this is more.

Like Mark said, we're getting to the end of the project.

Two of them were specifically stopped and started.

Not only through the pandemic, but because of the supply chain. That's never good for contractor right as you reassemble the team and get going again.

And.

Look what we're known for Amcor is we will finish the work.

But then we're also known for it.

Reflected in these write downs as our ability to go win what we think will have partial title mint because.

Customer hasn't made an offer back the other way, we're putting together the case, our guys are pretty theaters and we'll see what happens.

But I wouldn't term these on the same magnitude as what we had eight years ago on a specific job I mean these are.

Yes.

What happens in business when you get a period of a very choppy environment, where you have either on a disruption in the job site.

One of them specifics with.

Carry on.

Further carry on from the first quarter, we thought we added all but one of them specifically was.

Workforce related right.

And it was related to our ability to get the right workforce at and had Covid disruptions and were working more overtime. We finished the job we have a great reputation and life goes on and I will tie that back to the earlier 0.1 of the reasons that we win this big work this complex technical work as well.

We've got the best people in the field to execute just work and we can assemble and put unfilled divest people and also people know that we are thoughtful and.

Our balance sheet shows the work will get done.

We understand that we manage this business through cycles and look I think work with the <unk>, we have lined up we feel pretty good about managing through this cycle, but again, we will see.

I mean, there was a negative GDP growth print today I don't know what that means for our business I just feel really good about where we are on page 12, and 13, right now which are our ipos and markets we have to work in.

I agree great color thanks, guys.

Welcome.

The next question comes from Brent Thielman of D. A Davidson. Please go ahead.

Okay, great. Thanks, Mark.

Tony on the <unk>.

Data center work it seems like it's keeping you.

Really active.

We're hearing some rumblings and concerns out there that things might pullback in that market verticals.

Any other commentary in terms of what Youre seeing out there in that market would be would be great.

We don't see that.

Could there be a short term disruption, we don't see that but anything we study anything we talk to these major builders.

We don't see a pullback I think anything youre hearing around pullback is their frustration around the supply chain I mean, just for amplification on that.

All of these data centers for the most part are backed up by either natural gas generators are diesel generators.

That is now after 52 weeks.

So as they try to think through how theyre going to sequence. These.

Data centers to come on they have to take that into our planning.

Thanks, Gary to come in and these are 50 megawatt facilities as a substation build outside almost every one of them.

Our substation two for one just to put in perspective with 50 megawatts is 50 megawatts with power about 500 to 2000.

This puts us in perspective, what's happening here.

Switch gear to do that at 42 weeks right now.

So credits and I think that people are feeling is can we get the supply chain to make delivery and then you get to the EPS systems.

It can take anywhere.

Square footage wise.

In our commercial two floors of a typical commercial office building 60000 square feet. That's the battery room to run that data center for somewhere between a minute in a minute and a half until the generator kicks on so these are the kinds of systems that are more difficult to acquire right now and I think thats, whats, causing and thats what caused the delay.

In our electrical business. So it's good news for us.

Those deliveries are going to start saying, we had pretty good performance without that in our mix and then as we get through the back half of the year and into next year that should be a favorable mix for us.

Okay really helpful. Tony I appreciate that.

And then the.

I mean, it sounds like on the building services side.

Delays in getting big equipment.

Seasonal factors and it sounds like you guys think that's going to drive a pretty immediate.

Unusually stronger second half for that segment is that.

Fair characterization, just anything you're seeing out there it should coupled with repair service demand.

Mike Boorda came right now sleep with one eye open in equipment deliveries.

Not 100% sure that these manufacturers are going to meet their commitments may look I'll be blunt I was in this game 18 20 years ago.

They are all terrible at deliveries right now.

They are not performing and they are communicating terribly.

I am very fortunate to work with the team that stay on top of this every day and are very good at understanding the language back from those Oems with respect to their equipment deliveries and fulfillment of those deliveries.

We've got the best team.

In the business interpreting those results.

But all four of them are terrible right now.

Okay I appreciate it. Thank you thanks for that.

The next question from Noelle Dilts of Stifel. Please go ahead.

Hi, guys.

Uh huh.

Congrats on the quarter. Thank you.

Yes Hello.

Maybe in part a little bit on how you're thinking about M&A with the share repurchase announcement.

Yes, Scott.

And in terms of priority, it's what youre seeing in the market, how youre generally thinking about.

So for M&A.

In general nothing changed in our philosophy.

We've been balanced capital allocators for a while here at EMCORE.

And I think in any given situation.

Tony invest like Crazy in organic growth when you have.

And quite frankly, we have we spent a little more on capital.

<unk> talked about the growth in one.

One of the big considerations, we think about on a large project is what is cash flow characteristics of that project.

And we know there is sometimes an investment somewhere in the middle of the project.

And one of the reasons, we win some of those large projects. Let me first as always technical capability, but also people look at it and said you guys run a contract or the way you should run a contractor.

And that's with a conservative balance sheet that we can figure it done.

The second thing is we're very conscious of our authorities and.

About the relationship with them, we have great relationships.

With leading surety companies and they appreciate how we run that.

And keep that balance sheet.

<unk> done this for a long period of time with them to the point, where the trust based relationship. We have there allows our people with confidence to go out and look at jobs and not worry about surety.

And Mark I think we have about $1 billion five of that out there right now, it's a little bit more than 1 billion.

And alongside surety credit sets the conversations we have with these loss projects people, whether they be in Hyperscale data center semi.

<unk> health care facilities, where they will work with our people, our general counsel and they'll say us and say.

No.

<unk>.

We get it but can we put a corporate guarantee around that and that all ties back to that thought helpfulness that we have around capital allocation and a strong balance sheet.

So organic growth will always come first and then I think after that then we have the dividend, which we think is a commitment.

Over time.

And we just increased it and we feel good about that and then we balanced capital allocation between share repurchases and acquisitions.

The reality is we've been fairly.

Returning cash to shareholders since 2017, 18, especially I think.

1 billion, one 1 billion two has now been returned to shareholders through share repurchases.

I gave our CFO a ton of credit for how we think through that with his team and how they execute it.

And then we clearly we are exiting the year last year with a big cash position now we built that big cash position because we're one of the best cash generators in the business over time from continuing from our operations.

But we also had a dislocation right going from <unk>.

<unk>, 19% to 20 with the pandemic.

And in this business.

The revenue shrunk and we threw up a lot. We knew we had this one time mark III span of excess cash.

Well I was either going to get put to work on positioning that we're going to get put to work with buyback and then when we saw the dislocation I would not just say in our stock but in the market through the first six months of the year. We thought it was incumbent upon us to step in and repurchase shares because reality is.

Versus any $400 million.

Acquisition, we could've made for EMCORE. The best company, we can buy at that multiple was EMCORE and the first six months of this year.

Think about all of this we think about it over time.

All in <unk> and we've been acquired.

Good placeholder somewhere between $150 million to $300 million a year.

And the best deals that happen with us or people that.

Our selling their life's work going to be part of the future.

And recently, we did <unk> holdings.

Dennis <unk> out there in Ohio Terrific company, Great reputation, we feel really good about our future together.

Several years ago the team down in.

Atlanta, and <unk> that have a great presence in the southeast.

And probably some of the best.

Leading edge people in Burma and pre fabrication in the industry. We've worked together they taught us a lot. We've taught them alone. It's been a great group of people to have on our team.

And then the whole fire protection built out.

Going all the way back with <unk> now in the organic at Shambaugh and communal coupled with acquisitions to build out that portfolio around the shambaugh platform and then fabrication shops. The investments we've made on top of that not only in Akron, Ohio with calming Albert Fort Wayne, Indiana, and in Alabama, right by one of the.

Pipe producers.

In Arizona. These are all thoughtful expansions of capacity to allow us to serve our customers.

After an acquisition strategy that helped us gain access to not only new capabilities in that market, but also our geographic presence.

And then and then you go to mechanical services, where we will book within a geography, maybe by platform and then build it out much like we've done in Florida and in California. The Mesa team I mean, it's been a remarkable story over a long period of time of the application of capital acquisition capital in organic capital to go from a small.

Paul.

<unk>.

Pretty good capability Orange County focused.

Contractor with Bob Lake and Charlie Fletcher and the team out there to a.

I would say the leading controls and HVAC service company across basically four states in the west.

On a terrific job and it's <unk>.

Pushing on 200 plus million dollars.

And that's been mostly organic but it's been the application of capital to buy.

Small contractors in the market and geographically fit it out and we see those opportunities in front of us and I think you know me well enough. We always have said deals happen when they happen we're always in the market.

And.

We haven't been that success over the last four years five years and.

In competition with private equity on a deal part of that is our choice.

I've never been a fan we got good visibility down through the organization on buying somebody else's.

Consolidation or roll up their rollout, we're not we are operators.

And I've never been a big fan of that.

Unless we can really get down in the organization to understand who's running the local operations.

So we've sort of stayed away from it and.

And look at the end of the day, we're going to buy what we're good at we are good at trade contracting we are at service and.

And we are.

<unk> highly technical people and we are very good and that's really the theme that unites all of those segments and we are very good.

Taking something that's very well run helping us make it a little better run and then growing it once we buy it so nothing's.

Has really changed and.

We'll just keep executing the way we've been executing.

Yes.

Noel.

Yes. Thank you.

Yeah.

Thank you.

Yeah, again, I would spend a little time on that because it's always important to reiterate which made us really good over a long period of time, yes.

Absolutely, we don't react to fads, and we just continue to execute.

And I think Thats a nature of the work we do.

Yep.

Thanks.

Okay anybody else operator.

This concludes our question and answer session I would like to turn the conference back over to Tony Guzzi for any closing remarks.

Yes, so I'm just going to finish the way I started I would like to thank all the folks at.

<unk> continued to support us.

And have listened to and supported our growth story over a long period of time and I'd really like to thank.

Our segment and field leadership and our corporate staff.

It's been really great execution over a long period of time in these last three years have been tough right but.

One to be big excuse makers.

And we're going to continue that.

And I think what's made us successful as we think through everything carefully.

And we very rarely very rarely go off that track.

And with that we run by a set of values of mission first people always and our people love to execute for their customers and take care of their people and will continue to do that we'll talk to you in third quarter.

Be careful in the heat and if you have it you can't get your air Conditioner fixed look for your local error.

On our website and with that I'll, let you go.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Okay.

Okay.

Okay.

Okay.

[music].

[music].

[music].

Good morning, My name is Andrea and I will be your conference operator today.

At this time I would like to welcome everyone to the EM core groups second quarter 2022 earnings call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

If you would like to withdraw your question. Please press star number two.

Please note this event is being recorded.

Mr. Brad Newman with F. T I consulting you may begin.

Thank you Andrea and good morning.

Welcome to the EMCORE Group Conference call. We are here today to discuss the company's 2022 second quarter results, which were reported this morning, I would like to turn the call over to Kevin Matz Executive Vice President of shared services, who will introduce management Cadman. Please go ahead.

Thanks, Brad.

Everyone.

As always thanks for your interest in core and welcome to our earnings for the second quarter.

For those of you who are accessing the call via the Internet and our website welcome as well we hope arrived at the beginning of our slide presentation that will however market today.

But to.

This presentation and discussion contains forward looking statements and may contain certain non-GAAP financial information page two of our presentation describes in detail. The forward looking statements and the non-GAAP financial information disclosures I encourage everyone to review both disclosures in conjunction with our discussion and accompanying slides.

On slide three we had the executives who are with me to discuss the quarter and six months.

They are Tony Guzzi, our chairman, President and Chief Executive Officer, Mark Pompa, Executive Vice President and Chief Financial Officer, and our Vice President and General Counsel Maxine Mauricio for call participants not accessing the conference call via the Internet. This presentation slides will be archived in the Investor Relations section of our website under.

And you can always find us at EMCORE group Dot com with that out of the way. Please let me turn the call over to Tony Tony Yeah. Thanks, Good morning, everybody and thanks for your noncore.

My initial comments will focus on pages four through six of the presentation. We had a strong second quarter at EMCORE with revenues of $2 7 billion and diluted earnings per share of $1 99.

We delivered overall quarterly revenue growth of 11, 1% with organic revenue growth of nine point something.

Percent, whereas operating income margins of 5%, which is especially strong with considering the headwinds we faced with supply chain issues.

We generated quarterly operating cash flow of $77 million and exited the quarter with very strong remaining performance obligations or <unk> of $6 5 billion, which represent nearly 27% growth from the year ago period, and 15% from year end 2021, we.

We remain committed to our capital allocation strategy, returning a record $488 million cash to our shareholders through June 32020, and a volatile operating environment. Our team has a resilience and flexibility as we continue to drive successful results for our customers and our business.

Forward momentum this quarter was driven by two key factors.

We are seeing strong demand for our specialty contracting construct versus across a variety of sectors, where we can differentiate ourselves such as health care water and waste.

Commercial and industrial Slash manufacturing, we also continue to see strong forward demand for our data center and high Tech made during.

Drink construction services are.

The segment's reported combined operating income margin of six 9% in the quarter.

Our mechanical construction segment operating income margins were a strong seven 2% and electrical construction segment operating income margin rebounded to a much improved six 2% versus our first quarter performance.

Performance in both side continues to be impacted by ongoing supply chain issues related to equipment lead times and deliveries and most of these issues that impacted our margins were from projects, we booked over two to three years ago prior to the emergence of inflationary.

Any challenges.

Every day, we are making improvements to our planning.

<unk>.

And workforce scheduling that better position us to navigate volatile supply chain environment.

And as difficult as it was in the first quarter.

How is proving useful as we work with our suppliers.

I was moving and obtain the most comprehensive delivery mission possible.

In the United States building services segment, we faced the same ongoing supply chain issues as in the two segments with respect to our project work, where we have record <unk> <unk>.

The projects and where their growth.

It's more than 20% on a year over year basis, our results are being driven to a large extent very strong growth for our HVAC repair service, our highest margin product line in the U S building services segment. This strong repair service growth makes sense as we are not able to execute some equipment.

<unk> work, because a very extended lead times for the HVAC equipment, if our customers cannot replace aging inefficient equipment.

Fix it for for them. We also performed very well in our commercial site based business will continue to provide stable performance through excellent execution.

Account selection.

Industrial services segment is performing about how we expected on a year to date basis, we execute turnaround services as anticipated.

<unk> to improve operating margins demand is strong.

But our customers are under considerable pressure to keep their facilities operating at what is extraordinarily high utilization or United Kingdom building services segment continues to deliver steady performance and continues to serve some of the most important and sophisticated customers in sectors in the UK.

Before I turn.

It over to Mark I, just wanted to emphasize the following a record return of cash to shareholders. We left the second quarter with a strong balance sheet. This strong balance sheet serves as an important catalyst to win work for some of our most sophisticated customers executing large and complex projects record <unk> of $6 5 billion is a testament to.

Not only our execution, but also our financial strength with that I will now turn the presentation over to Mark for a detailed discussion of our financial results. Thank.

Thank you Tony and good morning to everyone participating today.

Hey.

For those accessing this presentation webcast now on slide seven.

As Tony indicated over the next several slides I will supplement Tony's opening commentary on <unk> second quarter performance as well as provide a brief update on our year to date results through pretty.

All financial information referenced this morning is derived from our consolidated financial statements.

Both our earnings release announcement and Form 10-Q filed with the Securities and Exchange Commission earlier. This morning, So, let's revisit and expand our review of <unk> second quarter performance.

Consolidated revenues of $2 71 billion are up $269 7 million or 11, 1% over quarter two 2021.

Our second quarter results include $33 7 million of revenues attributable to businesses acquired pertaining to the such businesses were not owned by <unk> in last year's second quarter acquisition revenues positively impacted our United Electrical construction segment within the second quarter.

Before reviewing the operating results of our individual segments I would like to highlight that our $2 71 billion of quarterly revenues represents a new all time quarterly revenue record for the company. Despite the caution in the United Kingdom building services segment revenues, which was largely due to unfavorable foreign exchange rate movements the specifics for each of our.

Our reportable segments are as follows.

United States electrical construction segment revenues of $64 1 million increased $72 million or 14th.

<unk> from 2021 comparable quarter, excluding incremental acquisition revenues. This segment's revenues grew organically, 7% quarter over quarter increased project activity within the commercial market sector inclusive of the telecommunications and high tech sub market sectors as well as growth in each of the healthcare manufacturing water and we.

Water market sectors were the primary driver.

Of the period over period improvement.

Partially offsetting these increases was a decline in revenues from the institutional market sector due to the completion or substantial completion of certain projects performed in the corresponding 2021 period.

United States mechanical construction segment revenues of $1 $66 million increased $97 million or 10, 1% from quarter two 2021.

Revenue growth during the quarter was derived strictly from organic activities within the majority of the market sectors, we serve the manufacturing water and wastewater and institutional market sector is experiencing the most significant period over period increases.

We also continue to see revenue growth within the commercial.

Market sector, driven by demand from customers within the semiconductor and life Sciences industries.

Second revenues for <unk> combined United States construction businesses of $1 63 billion increased $169 7 million or 11, 6% from quarter two 2021.

The United States services quarterly revenues of $677 8 million in the $6 million or 10, 8% revenue growth was generated within the segments commercial site based and mechanical services divisions with respect to commercial site based activity.

<unk> additions and scope of our site expansion with existing customers, where the drivers of the quarterly increase in revenues within mechanical services, we have seen a continuation of the trends that existed in quarter, one, notably we have experienced an increase in service repair and maintenance volumes, partially or supply chain delays have resulted in the need to extend.

The useful lives of HVAC equipment and instances when new equipment is not readily available. In addition, there continues to be a heightened for a building and then control.

With an emphasis on improving building efficiency energy consumption and indoor air quality.

The industrial services segment revenues of $284 5 million increased $49 3 million a 1% revenue segment have grown in comparison to the comparable products.

For each of the last four quarters. So we are some stabilization in demand for our downstream for downstream focused services. This has led to recent field services with some of them in the spring turnarounds as well as greater maintenance and capital project activity. This growth is despite the headwinds within the upstream and midstream energy.

Sectors, which is impacting certain of our service lines. We are also seeing an increase in shop services revenues for new equipment as.

As well as pull through repair projects, resulting from ongoing turnarounds with refinery utilization levels in excess of 90%. We remain hopeful that the last six months of 2022 will provide market that can perpetuate this segment's recent trend of improving results.

United Kingdom building services revenues of $114 million decreased $15 $3 million. This revenue contract was predominantly attributable to unfavorable exchange rate movements of $12 5 million a quarter, excluding the impact of foreign exchange.

Growth in project activity within this segment was more than offset by a reduction in service contract revenues due to the loss of certain contracts not successfully attained a rebid. Please.

Please turn to slide eight.

Selling general and administrative expenses of $245 4 million represent nine 1%.

The increase of $2 4 million from quarter 2021.

For incremental expenses attributable to companies acquired a $3 $1 million.

<unk> of intangible asset amortization.

<unk> SG&A expenses for the quarter declined slightly on an organic basis.

As a reminder, 2021 second quarter included a $4 1 million provision for credit loss within our U S. Industrial services segment related to a customer bankruptcy.

Our credit loss activity in the current year second quarter is substantially less contributing to the period over period organic SG&A decline.

Despite adding personnel to support strong organic revenue growth in travel and entertainment expenses continuing to trend higher as bits of resumes that cadence we have been successfully leverage our cost structure, resulting in a reduction in our SG&A margin. We continue to remain disciplined with overhead investment and we will seek.

<unk> sees and economies of scale as we drive future revenue growth.

Reported operating income of $137 6 million.

Favorably compares to $133 for operating income to our second quarter.

Quarter, two operating margins of five 1% is down four point from 2021 quarter and is largely due to a less favorable revenue mix within our U S. Construction operations, which I will cover in my segment comments.

As a reminder, our second quarter 2021 consolidated operating margin of five 5% represented a quarter to your record spin.

Specific quarterly operating performance by reporting segment is as follows.

Operating income of our U S. Electrical construction services segment of $35 1 million decreased seven nine and from the comparable 2021 period.

<unk> six.

Six.

That represents a reduction from the eight 7% in last year's second quarter to.

The decrease in both operating income and operating margin is due to a less favorable project mix within the commercial institutional and transportation market sectors when compared to the three year period. In addition, we did experience certain discrete project write downs this quarter that reduced this segment's operating income by $7 million these losses negatively the.

Electrical construction quarter to operating margin by 140 basis points.

Further while from quarter, one we continued to experience labor productivity and efficiency challenges due to supply chain difficulties, resulting in equipment delivery delays, which has impacted project timelines. Although this segment continues to lag 2020 performance. We are reporting substantial sequential improvement in both margin and operating <unk>.

Dollars when compared to the first quarter of this year.

Segment operating income of our U S. Mechanical construction segment of $26 9 million was essentially flat with the comparable 2021 period.

Reported operating margin of seven 2% represents a 70 basis point reduction from the seven 9% earned a year ago as referenced during the last two quarters. Our mechanical construction segment has a larger number of active projects within the manufacturing and water and <unk>.

Wastewater market sectors, where we are either acting as a construction manager or general contractor.

This is the percentage of our self perform labor is less than a typical mechanical construction project, thereby resulting for gross margin profile.

This segment. Additionally, experienced certain project write downs during the quarter, which negatively impact operating margin by 40 basis points.

Consistent with our electrical construction this quarterly.

U S. Mechanical construction sequentially improved both reported operating margin and operating income dollars from quarter one of them.

Operating let's building services to 38 million or five 6% of revenues, which represents a $5 $6 million increase in operating income in the 30 basis point improvement in operating margin.

Operating performance within the segments mechanical services Division both.

Both favorable project execution as well as the impact of certain price adjustments aimed at better aligning our billing rates with the increased costs. We have experienced were the key drivers of this segment's increases in operating income and operating income margin.

Our U S industrial services segments operating $6 5 million represents a $7 million improvement from the 200 dollar operating loss reported in 2021 second quarter. This is our industrial segment's third consecutive or operating profit.

Since reporting periods prior to the pandemic, albeit at operating but remained lower than historical levels. As we continue to battle, the competitive pricing environment, and a higher and higher fee cost inflationary headwinds on a positive note anticipated projects are either occurring are scheduled to commence during the remainder of two.

<unk> thousand 22 in line with our initial planning expectations.

UK building services operating income of $6 4 million or five 6% of revenues represents a slight decrease from this quarter of 2000 Q1 due to the unfavorable exchange rates for the pound sterling versus the United States dollar.

We continue to experience strong project demand within this segment as our customer base advanced capital investment programs, which is contributing to the 20 basis points of operating margin expansion per year.

We are now on slide nine.

Additional financial items of significance for the quarter not in the previous slides are as follows quarter. Two gross profit of $383 million is higher than the comparable 2021.

By $6 $7 million or just under 2%, However, gross margin of $14 <unk>.

It is lower than last years second quarter due to the reasons covered during my operating commentary, including project mix supply chain difficulties and construction project write Downs, Inc.

Incremental revenues helped us achieve a new second quarter gross profit record, but prevailing macroeconomic headwinds are hindering our ability maximize profit conversion.

Diluted earnings per common share in the second quarter of 2022 is $1 99.

As compared to $1 78 per diluted share for the prior year period. This second quarter EPS performance represented quarterly earnings per share record due to a combination of greater net income and a reduction in our weighted average shares.

Given and you'd share repo activity.

Please turn to slide 10.

With the quarterly commentary complete I will touch on highlights with respect to <unk> results for the first six months of 2022.

Revenues of $5 3 billion, an increase of $558 million or 11, 8%.

10% was generated organically.

Operating income of $237 6 million or four 5% of revenues represents a five 1% reduction from the results for the first six months of 2021 as our improved second quarter 2022 performance was not enough to offset most start in quarter, one with our increased share repurchase activity and corresponding.

Option in shares outstanding today.

Diluted earnings per share of $3 36.

Eclipses that of the prior year to $3 32.

Slide 11.

Led by the strength of our balance sheet <unk> remains in a position to invest in our business with <unk>.

Capital to shareholders.

Good against our strategic objectives, our cash on hand has declined from year end 2021 levels as we have allocated at $454.

Towards the repurchase of our common stock during the first months of calendar 2022 Approx.

Approximately $272 5 million of this amount was up during the second.

As equity market volatility continued due to inflationary and interest rates.

The midpoint of this year.

And then doubled our previous high for any share repurchases.

Cash to shareholders.

Our quarterly dividend, which amounted to $13 million during the year to date period has been on when evaluating the working capital investment necessary to sustain our strong organic revenue growth as well as our future opportunities. In addition to tight for both capital and strategic investments in addition to our share repurchase and dividend activity.

Additional facts for the period over period decline in our reported cash balance include $26 $6 million in payments for acquisitions and $27 7 million in capital expenditures. In addition to cash other movements in our balance sheet of note are as follows working capital has nearly 307 million.

The decrease in cash disrupt rinsed, coupled with an increase in our net contract liability position was partially offset by an increase in accounts receivable given the revenue growth. During the period goodwill has increased marginally since December of last year, given the acquisitions completed by us thus far in 2022 net identifiable intangible assets have.

Kris by approximately $12 million. During 2022 was amortization expense is more than offset the additional intangible assets recognized in connection with our year to date acquisition activity total debt exclusive exclusive of operating lease facilities remains fairly consistent with that as of December and <unk> debt to capitalization rate.

<unk> has increased from 10, 4% at year end, 2021% to 11, 8% at June 32022, given the reduction in our shareholders' equity, resulting from our share repurchase activity during the six months.

To pick up from both Tony and my earlier comments <unk> remains committed to our capital allocation strategy.

By both our share repurchase activity to date as well as todays announcement that our board has approved an additional $500 million authorization under our share repurchase program.

An increase in our dividend of approximately 15% with my proportion of this mornings slide patient complete I will now return the call back to Tony Tony Thanks, Marc and I wanted to be on page 12 remaining performance obligations by segment and market sector.

Just like last quarter, the second quarter was another strong project bookings quarter for the company.

We continue to expect experienced core demand across all our segments and many of our market sectors.

Total company <unk> at the end of the second for $6 2 million.

Three nine or 25% over June 32021, total of $5 1 billion measuring from the end of 2021, RPI or up 862 million. Thus far this year or a strong 15, 4%. Additionally, second quarter project bookings are likely.

Strong buying by an increase of <unk> $508 million from this year's first quarter.

All almost all of the <unk> increase this quarter was organic.

Growth was broad based with each of the five segments growing arpaio totals from both the year ago and year end 2021 periods.

We are positioned in active nonresidential market sectors and continue to see velocity in our business. The one two punch we highlighted in our first quarter call continued this quarter, where we experienced both strong revenue growth and total RPM growth, while our <unk> growth, thus far can be attributed adding costs due to outside factors.

We continue to see an active bidding environment. Despite current supply disruptions and inflation challenges together, our domestic construction segments experienced strong project growth year over year <unk>.

<unk>, increasing over $1 billion or 25% from June 2021, the mechanical segments. Our RPM has increased by 660 <unk> right.

Excuse me or 23%.

While the electrical construction segment saw an increase of $350 million or nearly 30%.

Since December 21, our domestic segment <unk> have increased over $600 million.

U S building services <unk> levels increased $328 million or 44% from the year ago quarter, and now has over $1 billion in quality project in service.

As I mentioned earlier extended lead times for HVAC equipment combined with a continued push for energy efficiency and improving building wellness is resulting in our customers asking us to retrofit and repair equipment. Additionally, strained equipment availability is driving our repair service which is.

Highest grow margin work that we do at amcor.

Moving to the side of the page, we show <unk> broken down by market.

Continuing the trend of RPM growth pace in the second quarter was.

Most market sectors with <unk>, almost $1 1 billion.

$700 million of which was booked in half of 2022 also agreeing to this $1 $1 billion increase where projects towards in the Hyperscale data Center high Tech semiconductor arena as well as projects within <unk>.

Life Sciences, and pharma businesses all of this shows the diversity and strength of <unk> end markets finished.

Finishing our sector <unk> growth year over year health care Rpms were up 10% institutional up 40% and short duration projects, which includes much of the HVAC retrofit project work are up 26%.

Partially offsetting this was a reduction in transportation <unk> as while as minor decreases in water and wastewater and industrial and manufacturing.

From both a business segment end market perspective, I continue to like the balance and breadth of our Rps.

We get to go to my one of my favorite slides, which is page 13, and I'd like to turn there now and we can talk about why we remain optimistic about four.

For the future.

On this page you see well positioned and growing non residential market interest and I'm going to talk about each of these.

<unk> data centers and semiconductor fabrication and we had big news in the semiconductor front end EMCORE will benefit from that because we are working with all of those customers that will benefit.

We will see strong electrical mechanical and fire protection demand across all of those opportunities in semiconductors and <unk>.

Positioned well in Arizona, specifically mechanically we are positioned well across the entire RFE will there'll be some.

<unk> projects done.

With fire protection and capability in Arizona, and burgeoning capability in Ohio, Ohio on the Dr. <unk> data centers.

It's trying to say I believe there are none better at mechanical and electrical construction within data centers than RF companies, we have leading positions in some core of geographical markets and we can build from an enterprise level right.

Two a hyperscale data center using 50 megawatts power.

Our folks are terrific and those teams and dine Portland and Salt Lake.

<unk> D C.

Gibson.

Forest these.

These people are all data center builders on the electrical side on the mechanical side, Bachelor and Kimball pulling Kent.

F N G are exceptional data center builders.

They know their work we're trusted by both our general.

Contract tumors.

And our.

One of our customers.

They come to us because we have great technical skill and they know that we have the financial strength to complete and finish those projects.

Sterile manufacturing side, we are very well positioned.

Mark talked about some of the ability to bring together a prime project.

Across a number of trades, especially for plant relocations.

We also are market leaders and food.

Food fabrication, if you go to that trade business.

There are none better than southern industrial contractors down in the southeast and they also move up into the lower Midwest and we not only help people fix their existing abilities. We help them upgrade where they are and they are hurt and moving and relocating equipment and building and manufacturing capacity our food <unk>.

Assessing expertise is owned through our shambaugh and Sun.

And we also across our fleet of things are.

We can do as much as electrical charging station work.

We need to be at the higher end of that and we do that exceptionally well health care, that's always been a core.

Core market for them.

We were integral and a lot of the things that had to happen with the pandemic to build extra capacity within our system and we are now part of the retrofit and expansion of not only hospital systems, but medical buildings in outpatient surgery centers.

Water and wastewater are market really for that for the most part we do electrical work in different parts around the country. The bigger part of that work is mechanical.

The team down a point, Ken South and to some extent Harry Pepper are very good at that work and the <unk> team has had a leading position in both the east and West, Florida, and helping with the population recently consent decrees that have happened there.

<unk> services, if we are the leading bureau within the top three are people that can provide mechanical services solutions and those solutions that we provide.

Not only provide efficiency they provide building of resiliency and they also now with the pandemic wellness has even become more.

The building efficiency is one of the major ways that.

You can drive carbon reduction.

That happening across our footprint right because as you increase the building wellness and increased outside are coming in you have to even seek more efficiency within the building because actually acts as a detriment.

Building efficiency.

A wonderful for our people to meet our customers and for us to meet our.

Our carbon reduction goals that people there our client set.

And we do that also through control solutions fire protection there are none better.

And then.

The teams of shelf done.

Now.

Bring net type.

Solutions to some of the most complex service and construction jobs and I'd be remiss not to say also.

We are going to be big participants.

<unk> portfolio of projects, not only renewables, but carbon reduction and capture project.

We like our position that work for the most part is happening in our <unk> segment, a lot of it has been delayed and in our industrial segment.

Where they are.

Speight and solar projects and they also help within wind projects on the transmission side as does wausau out in the inner mountain area.

Of course participate in a lot of robust.

We go up and down a little bit, but the general trend of these markets that I. Just went through are up into the right. We spent a lot of time, putting the assets in place and we've got some of the best teams in the market against these opportunities.

I'm going to go to page 14, and 15, now and I'm going to close out this discussion and we will take your questions.

Entering this year, we knew that we would face some margin challenges we were all the way back in February 2021 talking about supply chain with our year end 'twenty call.

And we also knew that because of our product and project mix and you couple that with what we thought was happening with supply chain and Covid disruptions.

Our teams have done a great job getting these challenges in this operating environment and we are pleased with our current position.

Talked about demand for our services remains strong across most of our most important market sectors and in all of our reporting segments. As a result, we're going to update our guidance range.

We now believe that we will achieve $7 30 to $7 80 in earnings per diluted share and we expect at least $10 $8 billion in revenue.

Where we end up in that range I always sort of provide a roadmap of what could give you the ups or downs.

That range will depend not only on our execution, but also equipment and materials.

We anticipate that we will continue to experience supply challenges we.

We do expect to converted operating operating income margins on 5% for the remainder of 2022.

Similar to what we achieved in the first half of the year, if we approve from margins due to better supply chain execution and improved productivity productivity, we could see even stronger results in the back half of the year.

How do you get there and what are the bankers that drive that.

We expect to continue to achieve favorable SG&A leverage as compared to 2021.

We expect to see strong project demand across key market sectors like industrial manufacturing healthcare and commercial which includes both data center and semi projects.

We expect demand to be strong across a range of project sizes and scopes.

We believe you'll continue to see very strong HVAC service repair service demand.

As trends, we observed this quarter continue through the third quarter.

Thus summer heat, we are seeing helps us.

With a more normalized fall turnaround season in our industrial services segment, with our oil and gas customers and our refining and petrochemical customers.

We should start executing some renewable energy projects that are delayed because of material availability.

While we are pleased with our current trajectory and optimistic about the balance of the year. We are also aware that we will continue to face headwinds in the near term.

Covid is still here and while we believe we have the systems in place to navigate mitigates it challenges and keep our workforce safe.

We expect that some project sites will be disrupted.

Further supply chain issues.

Tests with a <unk> deliver the and pricing all challenges. This will continue in my estimation through the balance of 2022 into 2023.

Finally, with respect to challenges, we cannot ignore certainties and our macro environment.

Rising interest.

Tightening lending and energy.

Scarcity exacerbated by the conflict in Ukraine, and other policy matters.

Will cause issues to date as evidenced by our strong growth in <unk>. We believe we have the resilient operation. However, when the leaders of major financial institutions.

<unk> market conditions.

And we realize that it will likely.

We believe outlook are strong despite all that.

As evidenced by our year to date performance and our record <unk> of $6 5 billion.

Our confidence in our us reflect capital allocation strategy as we have returned a record amount of cash to shareholders up 468.

Through June 32020.

We announced an increase in our dividend by approximately 15% or eight cents per share per annum and our board has provided as mark talked to our announcements, okay and additional $500 million in authorization for share.

We will continue to take a balanced approach to cash management, considering all of the implications for maintaining and deploying funds.

Including maintaining cash and a strong balance sheet for our <unk> our investment in our in granite growth, which has been quite strong our acquisitions and our customer expectations for our financial strength. This approach to capital allocation has historically served us well.

Especially in periods of economic uncertainty.

We have to support our organic growth and we have a decent pipeline of acquisitions to invest in across our segments.

As always I'd like to thank you for your interest in EMCORE and I would like to especially thank all the members of our EMCORE team for their continued dedication hard work and execution for our customers and with that ill ask Andrea to the floor.

<unk> for your questions.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If you are using a speakerphone pick up your handset before Keith.

Your question. Please press star two.

At this time, we will pause now to assemble the roster.

And our first question will come from Sean Eastman of Keybanc capital markets. Please go ahead.

Hi, Tim update here good morning, Great update and thanks for taking my questions.

Yes.

First one.

Kind of more of a clarification question so.

You mentioned, how you really like the diversity and Rps, but of course per the disclosures. It shows over 45% of the mix is commercial.

None of the end markets, we're talking about are what I would.

Think of it is commercial.

And that piece is around the grid.

And there is a lot bigger than it was in say 2007 2008. So.

Can we just get some clarity on what that piece really is.

So it is growing and we I think we pointed it out in the commentary, which driving that growth is.

To go back historically, a why it ended up there right. Many many years ago. It wasn't a major part of our business and it was light manufacturing comprise data systems now, it's a bigger part of the business, but it's <unk> it's data centers.

Five in the growth.

Hi Tech manufacturing in general and more of what we were.

We're doing just build out work, but now we're doing bigger work life Sciences pharma and other types of that kind of manufacturing and we still have pretty strong demand driving that growth as we talked about in building services. There is all commercial for the most part and that demand drives along.

Retrofit projects and most of those are typical commercial the shine you're pointing out something it has grown as a bigger business.

It's what's driving that commercial backlog increase and that's why we took the time and our RP O section to talk about that Mark.

Re <unk>, Tony just said.

For not to go for the reasons again that Tony just mentioned.

Included in our commercial <unk> disclosure or all those things that Tony just highlight it as a major growth areas and have been major contributors to our profitability over the last several years.

We are reticent to change out categorizing that midpoint in the year.

But it's something that we need to evaluate internally as we go forward to provide analytical.

Analytical community I guess.

More written transparency transparency, we're already providing forward with regards to.

It's actually represent.

Okay, I think that's really important so I appreciate that.

And then on the margins also just to clarify I think Tony I think you said you guys have built in a 5% operating margin for the second half.

Struggling to get to the midpoint of the guidance would that number.

Maybe.

Yes.

Maybe I heard that wrong.

And also just broadly in terms of thinking about the progression of margins. We saw this really nice sequential improvement from <unk>.

Maybe talk about that bridge.

<unk>.

I would have thought that into the second half there would've been a lot of opportunity to continue to improve just in terms of some of the new construction construction work getting to later stages.

Driving a tailwind even if we're assuming the supply chain remains sort of staff.

Yes, so I'm going to kick this to mark in a minute, but broadly I set of around 5% and got it enter 20 basis points Youre right can move that Michelle.

The most of our caution and I'm, saying that number is around the macro environment.

And supply chain.

It's hard for me today and tell you that.

The supply chain is all fixed and as clear selling.

Lead times are terrible.

Oems are routinely missing those terrible lead times.

And that has implications for us and so for us to sort of sit here and not caution that would be irresponsible I think and then a second.

Secondarily.

We have work that's now going to be starting that's favorable to our mix that should be further along than it is and we're not exactly sure.

A month means a lot when you startup a large project on equipment deliveries and most of those larger projects were in concert with our customers ordering that equipment, they're actually buying it ahead of time.

And we will start off when that equipment is there and that could be delayed and can start two weeks from now it can start four weeks from now to start six weeks from now in a market I think thats, where our caution is then yes and then obviously.

So Tony Tony's around 5% as it has indicate it could mean something in the low 5% range. So clearly as you do that as you did the math I'm showing you came out with operating margins of five two or five 3% in the back half of the year.

So clearly no worse than they were in second quarter and significantly higher than they were in quarter, one and at the six.

Six months.

On a cumulative basis. So the variable there once again is the revenue number.

So that $10 8 billion of guided revenues ends up creeping up.

It's quite possible same point at a five or five 1% margin.

Level for the last six months.

Okay. Good stuff guys, all really helpful I'll turn it over there.

The next question comes from Adam sale Hymer of Thompson Davis. Please go ahead.

Hey, good morning, guys. Congrats on the strong quarter and are well timed buyback okay. Thanks Adam.

Hey talk about Rps or they because they're so strong are they at a level where <unk>.

They are starting to give you some confidence in 2023.

We don't give forward looking guidance, but the reality is.

I go back to.

Longer term trends and I go back to page 13 in our presentation and talk about those sectors and most of them will be up into the right.

Specifically know what will happen in the small project work no I don't do I know on what when New awards with no I don't but clearly our average project length is somewhere nine to 12 months. Some of these are longer term.

And we will see when they start up and then they finish again, we don't give forward guidance into 'twenty three.

And then.

Can we talk a little bit more about the electrical.

Write downs in those specific projects is there any.

Risk to those in the back half or does that does that margin hit that you took in Q1 and Q2, just just flip and go away for the back half.

Our business, we're always cautious to say write downs go away, we've had a hell of a run.

With that without any significant losses.

But our folks are working in unprecedented times, especially with respect to supply chain.

And most of the write downs that we had in the first half of the year. We're on projects. We took prior to this supply chain and inflation cycle, but that being said.

There's a lot of moving pieces. So we actually I would just refer you back to the previous question on the 5% around 5% margin. We don't see anything are absolutely we would've taken it right. That's how this business works.

But we don't expect it or we would've taken it and our electrical business has a good mix of work and a lot of that margin progression will be dependent on our ability to start some of that favorable mix work.

We'll all be related to supply chain.

I'm going to central jumped quickly so Tony's point, obviously to the extent that we've identified.

The necessity to take a write down we've taken 100% of it in the second quarter, but we can't defer to later periods is unsure of it Paul while now.

The only the only additional thing I'll add to Tony's commentary.

<unk>.

These projects are still active projects.

So they create a little bit of margin headwind in that segment, because we're going to be recognizing profit on the remaining revenues.

At a margin profile lower than what this segment traditionally.

<unk>.

That's the that's the negative aspect of it the fast act is that with regard to <unk>.

That were written down both in electrical.

Mechanical construction they are all over well over 50% complete some of them are even closer to 100% complete.

They are clearly not going to be the preponderance of revenues that are recognized in these segments as.

As we work through the last six months of 2022.

Almost led with that too because it's been eight years since I think I think it was.

2014 was the last time, we talked about our problem projects.

Great I'll turn it over to Adam.

And all in all fairness right. These are big giant project write downs this is more.

Like Mark said, we're getting to the end of the project.

Two of them were specifically stopped and started.

Not only through the pandemic, but because of the supply chain that's never good for a contractor.

Right as you reassemble the team and get going again.

And.

Look what we're known for EMCORE is we will finish the work.

But then we're also known for it.

Reflected in these write downs as our ability to go win what we think will have partial title mint because.

Customer hasn't made an offer back the other way, we're putting together the case, our guys are pretty theaters and we'll see what happens.

But I wouldn't term these on the same magnitude as what we had eight years ago on a specific job I mean these are.

Yes.

What happens in business when you get period of a very choppy environment, where you have either on a disruption in the job site.

One of them specifics with.

Carry on.

Further carry on from the first quarter, we thought we added all but one of them specifically was.

Workforce related right.

And it was related to our ability to get the right workforce on an ex COVID-19 disruption and we're working more overtime. We finished the job we have a great reputation and life goes on and I will tie that back to the earlier 0.1 of the reasons that we win this big work this complex technical work as well.

We've got the best people in the field to execute just work and we can assemble and put the unfilled. The best people and also people know that we are thoughtful and managing our balance sheet shows the work will get done.

And that we understand that we manage this business through cycles and look I think we're with the Ipos. We have lined up we feel pretty good about managing through this cycle, but again, we will see right. I mean, there was a negative GDP growth print today I don't know what that means for our business I just feel really good about where we are on page 12, and 13 right now.

<unk> end markets, we have to work it.

I agree great color thanks, guys.

Awesome.

The next question comes from Brent Thielman of D. A Davidson. Please go ahead.

Okay, great. Thanks, Mark.

Tony.

The data center work it seems like it's keeping you.

Really active.

Here's some rumblings and concerns out there that things might pull back in that market verticals.

And the commentary in terms of what Youre seeing out there in that market would be would be great.

We don't see that.

Could there be a short term disruption, we don't see that.

But anything we study anything we talk to these major builders.

<unk>.

We don't see a pullback I think anything you are hearing around pullback is their frustration around the supply chain I mean, just for amplification on that.

All of these data centers for the most part are backed up by either natural gas generators are diesel generators.

That is now after 52 weeks.

As they try to think through how theyre going to sequence. These.

Data centers to come on they have to take that into our planning to.

Switch gear that come in and these are 50 megawatt facilities as a substation build outside almost every one of them.

Substation two for one just to put in perspective with 50 megawatts is 50 megawatts of power about 500 to 2000.

This puts us in perspective, what's happening here.

Switch gear to do that is 42 weeks right now.

So medicine I think that people are filling is can we get the supply chain to make delivery and then you get to the EPS systems.

It can take anywhere.

Square footage wise.

Imagine a commercial two floors of a typical commercial office building 60000 square feet. That's the battery room to run that data center for somewhere between a minute in a minute and a half until the generator kicks on so these are the kinds of systems that are more difficult to acquire right now and I think thats, whats, causing and thats what causes that.

Delay in our electrical business. So it's good news for us.

Those deliveries are going to start saying, we had pretty good performance without that in our mix and then as we get through the back half of the year and into next year that should be a favorable mix for us.

Okay really helpful. Tony I appreciate that.

And then the.

I mean, it sounds like in the building services side.

Ladies and getting big equipment, maybe some seasonal factors there.

It sounds like you guys think that's going to drive a pretty.

Unusually stronger second half for that segment is that.

Fair characterization, just anything you're seeing out there it should coupled with repair service demand.

Mike Boorda theme right now sleep with one eye open in equipment deliveries.

Not 100% sure that these manufacturers are going to meet their commitments may look I'll be blunt I was in this game 18 20 years ago.

Our all terrible at deliveries right now.

They are not performing and they are communicating terribly.

I am very fortunate to work with the team that stay on top of this every day and are very good at understanding the language back from those Oems with respect to their equipment deliveries and fulfillment of those deliveries.

We've got the best team.

And the business interpreting those results.

But all four of them are terrible right now.

Okay. Appreciate it. Thank you thanks for that.

The next question from Noelle Dilts of Stifel. Please go ahead.

Hi, guys.

Uh huh.

Congrats on the quarter. Thank you so yes.

So maybe in part a little bit on how you are thinking about M&A with the share repurchase announcement.

King.

Yes, Scott.

And in terms of priority, it's what youre seeing in the market, how youre generally thinking about.

Yourself for M&A.

In general nothing changed in our philosophy.

We've been balanced capital allocators for a while here at EMCORE.

And I think in any given situation.

Tony invest like Crazy in organic growth when you have.

And quite frankly, we have we spent a little more on capital.

<unk> talked about the growth in <unk>.

One of the big considerations, we think about on a large project is what is cash flow characteristics of that project.

And we know there is sometimes an investment somewhere in the middle of the project.

And one of the reason we win some of those large projects. Let me first as always technical capability, but also people look at it and said you guys run a contract or the way you should run a contractor.

And that's with a conservative balance sheet that we can figure it done.

The second thing is we're very conscious of our authorities and.

About the relationship with them, we have great relationships with leading surety companies and they appreciate how we run that.

And keep that balance sheet.

<unk> done this for a long period of time with them to the point, where the trust based relationship. We have there allows our people with confidence to go out and look at jobs and not worry about surety.

And Mark I think we have about $1 five of that out there right now, it's a little bit more than $1 billion.

Okay.

And alongside surety credit sets the conversations we have with these large projects people whether they be in Hyperscale data centers semi to work health care facilities, where they will work with our people, our general counsel and they'll say us and say.

No.

<unk>.

We get it but can we put a corporate guarantee around that and that all ties back to that thought helpfulness that we have around capital allocation and a strong balance sheet.

So organic growth will always come first and then I think after that and then we have the dividend, which we think is a commitment.

Over time.

And we just increased it and we feel good about that and then we balanced capital allocation between share repurchases and acquisitions.

The reality is we've been fairly.

Returning cash to shareholders since 2017, 18, especially I think.

1 billion, one 1 billion two has now been returned to shareholders through share repurchases.

I gave our CFO a ton of credit for how we think through that with his team and how they execute it.

And then we clearly we are exiting the year last year with a big cash position now we built that big cash position because we're one of the best cash generators in the business over time and from continuing from our operations.

But we also had a dislocation right going from <unk>.

19 to 20 with the pandemic.

And in this business to the revenue shrunk and we threw up a lot. We knew we had this one time Mark three 4 billion of excess cash.

Well I was either going to get put to work on positioning or we're going to get put to work with buyback and then when we saw the dislocation I would not just say in our stock but in the market through the first six months of the year. We thought it was incumbent upon us to step in and repurchase shares because reality is.

Versus any $400 million.

Acquisition, we could've made for EMCORE. The best company, we can buy at that multiple was EMCORE and the first six months of this year.

Think about all of this we think about it over time.

<unk> all in additions and we've been acquired.

Place order somewhere between $150 million to $300 million a year.

And the best deals that happen with us or people that.

Our selling their life's work going to be part of the future.

And recently, we did could be holdings.

Dennis could be an <unk> out there in Ohio terrific company, great reputation, we feel really good about our future together.

Several years ago the team down in.

Atlanta, and <unk> that have a great presence in the southeast.

And probably some of the best.

Leading edge people in Burma and pre fabrication in the industry. We've worked together they taught us a lot. We've taught them alone. It's been a great group of people to have on our team.

And then the whole fire protection built out.

Going all the way back with <unk> now in the organic at Shambaugh and communal coupled with acquisitions to build out that portfolio around the shambaugh platform and then and then fabrication shops investments we made on top of that not only in Akron, Ohio with calming Albert Fort Wayne, Indiana, and in Alabama, right by one of them.

Pipe producers.

In Arizona. These are all thoughtful expansions of capacity to allow us to serve our customers.

After an acquisition strategy that helped us gain access to not only new capabilities in that market, but also our geographic presence.

And then and then you go to mechanical services, where we will work.

Within a geography, maybe by platform and then build it out much like we've done in Florida and in California, The Mesa team.

It's been a remarkable story over a long period of time of the application of capital acquisition capital in organic capital to go from a small.

Pretty good capability Orange County focused.

<unk> contractor with Bob Lake and Charlie Fletcher.

And the team out there to a.

I would say the leading controls and HVAC service company across basically four states in the west.

On a terrific job in its.

Pushing on 200 plus million dollars.

And thats been mostly organic but it has been the application of capital to buy.

Small contractors in the market and geographically fit it out and we see those opportunities in front of us and I think you know me well enough. We always have said deals happen when they happen we're always in the market.

And.

We haven't been that success over the last four years five years and.

In competition with private equity on ideal part of that is our choice.

I've never been effect, we got good visibility down through the organization on buying somebody else's.

Consolidation or roll up their rollout, we're not we are operators.

And I've never been a big fan of that.

Unless we can really get down in the organization to understand who's running the local operations.

So we've sort of stayed away from it and.

And look at the end of the day, we're going to buy what we're good at we are good at trade contracting we are at service and.

And we are.

<unk> highly technical people and we are very good and that's really the theme that unites all of those segments and we are very good.

Taking something that is very well run helping us make it a little better run and then growing it once we buy it.

So nothing has really changed and I think we'll just keep executing the way we've been executing.

Yes.

Noel.

Yes. Thank you.

Thank you.

Yes.

I would spend a little time on that because it's always important to reiterate which made us really good over a long period of time, yes.

We don't react to fads, and we just continue to execute.

And I think Thats a nature of the work we do.

Yes.

Thanks.

Okay.

Body else operator.

This concludes our question and answer session I would like to turn the conference back over to Tony Guzzi for any closing remarks.

Yes, so I'm just going to finish the way I started I would like to thank all the folks at.

We continue to support us and have listened to and supported our growth story over a long period of time and I would really like to thank.

Our segment and field leadership and our corporate staff.

It's been really great execution over a long period of time in these last three years have been tough right but.

One to be big excuse makers.

And we're going to continue that.

And I think what's made us successful as we think through everything carefully.

And we very rarely very rarely go off that track.

And with that we run by a set of values of mission first people always and our people love to execute for their customers and take care of their people and will continue to do that we'll talk to you in third quarter.

Be careful in the heat and then if you have it you can't get your air Conditioner fixed look for your local error.

On our website and with that I'll, let you go.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.