Q4 2023 EMCOR Group Inc Earnings Call

February 28, 2024

Good morning, My name is Allen and I will be your conference operator today at this time I would like to welcome everyone to the Amcor group fourth quarter and year end 2023 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 then two please note. This event is being recorded I would like to hand things over to Mr. Blake Mueller with F. T. I consulting you may begin.

Blake Mueller: Thank you Alan and good morning, everyone. Welcome to the Amcor Group Conference call. We are here today to discuss the company's 2023 fourth quarter and full year results, which were reported this morning I.

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.

Kevin Matz: Thanks, Blake good morning, everyone and as always thank you for your interest in EMCORE and welcome to our earnings conference call for the fourth quarter and full year 2023.

Blake Mueller: Those of you who are accessing the call via the Internet and our website welcome to you as well and you've arrived at the beginning of our slide presentation that will accompany our remarks today.

Blake Mueller: We are on slide two.

Blake Mueller: This presentation and certain forward looking statements and May also contain certain non-GAAP financial information.

Blake Mueller: Page two describes in detail the forward looking statements and the non-GAAP financial information disclosures.

Blake Mueller: I encourage everyone to review both disclosures in conjunction with our discussion and accompanying slides.

Blake Mueller: Slide three depicts the executives who are with me to discuss the quarter and full year 2023 results. They are Tony Guzzi, Our chairman President and Chief Executive Officer, Mark Pompa, Executive Vice President and Chief Financial Officer, Jason Nalbandian, Our senior Vice President and Chief Accounting Officer, Maxine Mauricio Chief Admin.

Blake Mueller: Straight of Officer, Executive Vice President and General Counsel, and Andy Backman, Vice President Investor Relations.

Speaker Change: For call participants not accessing the conference call via the Internet. This presentation, including the slides will be archived in the Investor Relations section of our website under presentations.

Blake Mueller: Can always find us at EMCORE group Dot com and with that said, please let me turn the call over to Tony Tony Thanks, Kevin Good morning, and thank you for joining us for our 2023 full year and fourth quarter earnings call.

Mark A. Pompa: Before we begin though I would like to recognize two of our executives Mark Papa.

Fortunate to operate in large growing market sectors like high Tech manufacturing networking communications manufacturing and industrial.

These sectors as well as our energy retrofit projects.

Our benefiting from long term secular trends.

They require excellence and specialty trade contracting.

We have challenges, but we have met them and we'll continue to meet those challenges are resolved and with a strong focused execution at every turn.

We finished the year with our RPM is at an all time high of $8 85 billion.

Which represents two 5% sequential growth from September 32023, and.

And 18, 6% growth over the year ago period.

Now I'm going to probably share some highlights from our segments.

We had excellent performance in each of our mechanical and electrical construction and U S building services segment.

Mechanical construction had an especially sellers 2023.

The operating results of our industrial service segment continue to improve at a measured pace and despite unfavorable economic conditions. Our UK building services segment is reporting solid operating income and operating margin.

The continued strength of our electrical mechanical construction segment as evidenced by 2023 revenue growth up 14, 4% at 18, 2% respectively.

2023, electrical construction operating margin of eight 3%.

And mechanical construction operating margin of 10, 5%.

The conversion from revenue to operating income by these segment has exceeded our expectations.

Expectations.

And really as a result of excellent execution adaptability Smart project selection and favorable contract terms.

In the construction segments, we selected key market sectors estimated negotiated in one meaningful projects planned and executed such projects well and safely deploy our highly skilled labor with strong productivity.

Our teams have increased productivity by pulling bim or building information modeling and pre fabrication add scale, while sharing best practices on construction means and methods across our company.

Said simply we have learned from both our successes and failures then deploy those learnings across our company to drive excellent results for our customers and superior financial returns for our shareholders.

In our construction segments, we continue to win and complete some of the most sophisticated projects in markets such as high Tech manufacturing.

Which includes semiconductors, the EV value chain biotech life Sciences and pharmaceuticals.

The network and communication sector, which encompasses our datacenter work and the manufacturing sector, which is being driven by reassuring domestic capacity expansion and also includes the renewable energy projects. We're working on and we have continued to see growth in our health care sector.

As a reminder, our mechanical product offering is broad across applications such as HVAC.

Process piping plumbing fire protection and life safety.

We are operating in key geographies, where such projects are in process and our life safety group has the capability to move across the country. We are positioned well with the right resources in the right market sectors and geographies to continue to win complex projects that allow us to perform well for our customers.

Our electrical and mechanical construction teams have deep expertise in data center market, which allows us to serve our customers with the right solution delivered under the most demanding schedules with excellent outcome for our customers.

As I have mentioned on earlier calls our segment our subsidiary management teams are leading in an exceptional way and allocating our resources in a thoughtful and pragmatic way, we continue to strive to optimize our project mix to produce great financial results.

Our U S building services segment continues its record of steady and impressive performance and it has a strong mix of work across the service lines. This segment's revenues grew 13, 3% in 2023 with an operating margin of five 9% demand persist for our mechanical in our mechanical services vision with.

Excellent execution across retrofit projects building controls and maintenance and repairs.

We are working across a variety of end markets and our customers remain focused on energy efficiency and indoor air quality upgrades. The mechanical services business drove the robust performance of this segment in 2023% due in large part not due in large part due in part to a strong repair service season. This past summer.

As heat and humidity blanket most parts of the country. The site for our services Division continues to deliver entering into multiyear facility maintenance contracts to leverage our self perform operating model for skilled tradespeople and operating engineers, while opportunities for growth remain in this area. These facility services contracts.

It takes some time to ramp up and the scope of these contracts can reduce expand or be terminated overtime and upon rebid. We have seen some contract duration as the real estate facilities see providers are especially aggressive on price and scope on some of these contracts as they are struggling.

Blake Mueller: And their commercial real estate businesses.

Blake Mueller: However, we will remain disciplined and not take any low price low opportunity contracts. Our industrial services segment improved in 2023 and had sustained performance improvement over the last two years.

Kevin Matz: Operating income improved by nearly 80% in the year, albeit from a low base, we had more turnaround seasons in 2023, and we had strong results from our niche services like heater repair.

Blake Mueller: We are experiencing greater levels of capital spending within our shop services division in the form of increased new build heat exchanger orders and have benefited during the year from certain renewable fuel projects. We are just starting to see the resumption of demand for utility scale solar projects currently impacted by supply chain and permitting issues.

Blake Mueller: Our industrial service electrical team has us positioned well in the solar market and that position should continue to improve.

Blake Mueller: Our U K segment performed in a manner consistent with the available market opportunities in 2023, the competition on some contracts as fierce as the UK economy is not strong and similar to the U S facility services market, we see the real estate companies bidding on contracts that aggressively due to weakness in the UK.

Blake Mueller: Commercial real estate market. However, we have a durable base of facility services contracts will build on that base and serve our customers well and all we experienced a reduction in annual revenues. When this segment, we are executing well as shown by the five 9% operating margin for the year.

Speaker Change: Our balance sheet remains strong and supports our organic growth and it provides us with the capital needed to expand our pre fabrication capabilities and investment in automation and robotics.

Anthony J. Guzzi: We also have the firepower to continue to make strategic acquisitions and I'm going to discuss that in more detail later without mark I'm going to turn it over to you.

Mark: Great Tony Thank you for those kind words, you said earlier and good morning to everyone participating on our call today for.

Mark A. Pompa: For those accessing this presentation via the webcast. We are now on slide seven.

Speaker Change: Over the next several slides I will provide a detailed discussion of our fourth quarter 2023 results as well as a summary of our full year performance some of which Tony just outlined during his opening commentary.

Mark A. Pompa: As a reminder, all financial information discussed during this morning's call is included in our consolidated financial statements within both our earnings release announcement and Form 10-K filed with the Securities and Exchange Commission earlier today with that let's begin our review of <unk> fourth quarter.

Mark A. Pompa: Consolidated revenues of $3 44 billion increased $489 4 million or 16, 6% from the fourth quarter of 2022 each.

Mark A. Pompa: Each of our domestic reportable segments experienced revenue growth during the fourth quarter, which was the case for all four quarters of 2023.

Mark A. Pompa: Revenues attributable to businesses acquired during the quarter were just under $11 million. So substantially all of our quarter over quarter revenue growth was due to organic activities. Our fourth quarters consolidated revenues established a new all time quarterly revenue record for the company and eclipsing our previous record set during the third quarter of two.

Mark A. Pompa: 23.

Mark A. Pompa: The specifics to each of our reportable segments fourth quarter revenue performance is as follows United States Electrical construction segment revenues of $763 4 million increased $49 8 million or 7% from quarter. Four of 2022. This segment continues to experience revenue growth across the majority of the market sectors that we.

Mark A. Pompa: Serve with the most significant fourth quarter revenue increases being generated within the manufacturing and industrial and high Tech manufacturing market sectors revenues of our United States Mechanical construction segment of $1 47 billion increased $339 3 million or approximately 30% from the year ago period.

Mark A. Pompa: This segment experienced revenue growth across all market sectors in which we operate with the most significant growth occurring within the high Tech manufacturing market sector. In addition, notable increases were seeing within the manufacturing and industrial networking communications health care and water and wastewater market sectors as communicated.

Mark A. Pompa: Throughout the year, driven by customer projects supporting the design and manufacturing of semiconductors as well as production and development of electric vehicles <unk> related battery technologies. This segment is experiencing strong demand for both fire and life safety as well as traditional mechanical services.

Mark A. Pompa: In conjunction with continued data center development as well as the domestic re shoring of critical supply chain by certain of our customers are the contributing factors to this segment's significant organic growth.

Mark A. Pompa: Both our electrical and mechanical construction segments established new all time quarterly revenue records with their fourth quarter performance.

Mark A. Pompa: Revenues of <unk> combined domestic construction segments totaled $2 4 billion for the fourth quarter of 2023, an increase of $389 1 million or just over 21%.

Mark A. Pompa: United States building services quarterly revenues of $802 million increased $88 6 million or 12, 4% excluding incremental acquisition contribution. This segment's revenues grew 10, 9% organically given increases across each of its operating divisions with the most significant growth being generated by mechanical services with.

Mark A. Pompa: And mechanical services, we are benefiting from strong demand for HVAC projects and retrofits as well as building automation and control services, while customer initiatives to improve energy efficiency in our indoor air quality are certainly contributing to this demand are opportunities remained broad based and are further enhanced by mandate in refrigerant phase outs.

Mark A. Pompa: In addition, our service volume continues to grow given an increase in our customer base as well as our geographic footprint.

Mark A. Pompa: <unk> industrial services segment revenues of 290 to $2 $5 million increased $16 2 million or five 9% quarter over quarter.

Mark A. Pompa: This marks the segment's fourth consecutive quarter of topline growth. In addition to more normal maintenance demand, we experienced the resumption in capital spending by our customers in the form of Newbuild heat exchanger orders and participation in several renewable fuel projects.

Mark A. Pompa: United Kingdom building services segment revenues of $108 8 million represents a reduction of $4 5 million or 4% from last year's fourth quarter as referenced throughout 2023. This segment's revenues have declined due to the non renewal of certain facilities maintenance contracts, which were still active in 2022 as well as a reduction in project work from <unk>.

Mark A. Pompa: Certain of those segments customers, who slowed their capital spending programs in response to macroeconomic headwinds within the United Kingdom.

Mark A. Pompa: Please turn to slide eight.

Mark A. Pompa: Reported operating income for the quarter was $299 2 million or eight 4% of revenues and favorably compares to $177 2 million of operating income or 6% of revenues a year ago consistent with my revenue commentary, our fourth quarter operating income and operating margin. Both established new all time quarterly records for EMCORE. This was achieve.

Mark A. Pompa: Through increased operating income in each of our reportable segments as well as expansion in operating margin in all but one of our segments specific fourth quarter operating performance by segment is as follows our U S. Electrical construction segment earned operating income of $76 3 million, an increase of $18 2 million or 31, 3%.

Mark A. Pompa: From the comparable 2000 $22 billion the reported operating margin of 10% represents an improvement from eight 1% in last year's quarter increased gross profit and gross profit margin within the institutional commercial and high Tech manufacturing market sectors were the primary drivers of this improved performance as a reminder, the results of this segment during the <unk>.

Mark A. Pompa: Quarter of 2022 were negatively impacted by certain discrete project write downs, which totaled $10 million and reduced this segment's operating margin by 140 basis points in the 2022 fourth quarter.

Mark A. Pompa: Operating income of our United States Mechanical construction services segment of $186 1 million represent a substantial increase of $81 3 million from last year's quarter and operating margin of 12, 6% represents an all time high for this segment greater.

Mark A. Pompa: Greater gross profit dollars and gross profit margin in the majority of market sectors in which we operate driven by a favorable revenue mix successful project Closeouts and better execution were the factors behind this segment's improved performance operating income for U S. Building services was $42 1 million or five 2% of revenues, which represents a 10 eight.

Mark A. Pompa: Percent increase the improved year over year performance was primarily due to the segments mechanical services division given the volume growth referenced during my revenue commentary coupled with favorable execution on both our HVAC project and repair service activities. Our U S. Industrial services segment operating income of $12 6 million or four 3% of revenues rep.

Mark A. Pompa: [noise] presents an increase of just over $11 million from the corresponding 2022 period.

Mark A. Pompa: <unk> in the quarter by improved pricing within our shop services Division, we are continuing to see operating margins of this segment move in an upward direction U.

Mark A. Pompa: UK building services is reporting operating income of $5 5 million or 5% of revenues, which compares favorably to that of the prior year period. The decrease in this segment's revenues was more than offset by increased operating margin as the segment continues to execute well across its portfolio of facilities maintenance contracts and add on project.

Mark A. Pompa: Work.

Mark A. Pompa: We are now on slide nine.

Mark A. Pompa: Additional financial items of significance for the quarter not addressed on the previous slides are as follows quarter. Four gross profit of $617 7 million represents an all time quarterly record for the company and it is higher than the comparable 2022 periods by approximately $163 million or nearly 36% gross margin.

Mark A. Pompa: <unk>, 18% as improved 260 basis points period over period, selling general and administrative expenses of $328 5 million represent nine 6% of revenues and reflect an increase of approximately $51 million from quarter four 2020 to SG&A for the current year's quarter includes $2 7 million of incremental expense.

Mark A. Pompa: His from businesses acquired inclusive of intangible asset amortization, resulting in an organic increase of just over $48 million, which was largely driven by personnel costs. In addition to annual cost of living adjustments and greater employee benefit costs. Our strong organic revenue growth has necessitated increased head count across many of our businesses.

Mark A. Pompa: Further the operating income outperformance across the majority of our reportable segments during the fourth quarter and full year 2023 periods resulted in incremental incentive compensation expense diluted earnings per common share in the fourth quarter of 2023 is $4 47 <unk>.

Mark A. Pompa: Compared to $2 63 per diluted share in the prior year. This fourth quarter EPS performance like many of our financial metrics. This quarter eclipses <unk>. Prior all time quarterly diluted earnings per share record, which was previously established during the third quarter of 2023.

Speaker Change: Please turn to slide 10.

Speaker Change: The quarterly commentary complete I will now supplement Tony's comprehensive introductory remarks and of course annual performance consolidated revenues of $12 6 billion represent an increase of $1 5 billion or 13, 6% when compared to 2022. Our full year results include a $107 1 million of incremental revenues attributable to businesses acquired pertaining to the <unk>.

Speaker Change: That such businesses were not owned by <unk> in 2022, excluding the impact of acquisitions annual revenues increased a strong 12, 6% with all of our reportable segments other than our United Kingdom building services segment generating strong revenue growth during the full year period operating income of $875 8 million or seven.

Speaker Change: 7% of revenues represents a 55% increase from calendar year 2022, along with 190 basis point improvement in operating margin each of our domestic reportable segments as Tony commented achieved double digit increases in full year operating income along with meaningful improvements in operating margin full year diluted earnings per share was <unk> 13.

Speaker Change: 31.

Speaker Change: And compares to $8 10, and the corresponding 2022 period, adjusting 2023 to exclude the third quarter impairment charge related to certain long lived assets within our United States Mechanical construction segment results in an adjusted non-GAAP diluted earnings per share of $13 34 for the year. This <unk>.

Speaker Change: Presents a 65% improvement over 2020 two's reported diluted EPS not surprising with our strong performance throughout the last 12 months full year of 2023 represents a record year for amcor, surpassing the companys previous all time performance achieved in 2022.

Speaker Change: We are now on slide 11, the <unk>.

Speaker Change: Strength of <unk> balance sheet continues to differentiate us from our competition and provides our customer with customers with confidence as we bid on large scale and demanding projects given our balance sheet, coupled with a borrowing capacity available to us under our recently amended and extended revolving credit facility.

Speaker Change: We remain well positioned to fund organic growth pursue strategic M&A opportunities and return capital to shareholders, our commitment to shareholder return as evidenced in part by todays announcement that our board of directors has approved an increase in our quarterly dividend of almost 40%.

Speaker Change: Notable fluctuations in our balance sheet when compared to December of 2022 are as follows.

Speaker Change: Cash on hand of $790 million and represents an increase of just over $333 million, our exceptional operating cash flow performance of 900 million, which Tony commented on earlier was partially offset by cash used for financing activities of just over $412 million given the repaint.

Speaker Change: <unk> of all amounts previously outstanding under our term loan and the return of $160 million to stockholders through share repurchases and dividends as well as cash used in investing activities of $161 million for acquisitions and capital expenditures, resulting primarily from the increase in cash just referenced our working capital balances increased by just over 202.

Speaker Change: $20 million from December of last year.

Speaker Change: Goodwill has increased by $37 $4 million as a result of the acquisitions completed by US in calendar 2023, while net identifiable intangible assets have decreased by $7 9 million as the additional intangible assets recognized in connection with these acquisitions was more than offset by $67 1 million of amortization expense.

Speaker Change: In 2023 total debt exclusive operating lease liabilities has decreased by $241 9 million almost entirely as a result of the aforementioned repayments made on our previously outstanding term loan after considering outstanding letters of credit the remains $1 2 billion of capacity available to us under our renewed.

Speaker Change: One 3 billion revolving credit facility the maturity of which now has been extended to December of 2028, our stockholders stockholders' equity balances increased by almost $500 million as our net income for the year exceeded our share repurchases and dividend payments made throughout 2023.

Speaker Change: <unk> debt to capitalization ratio has reduced to zero, 2% from 11, 1% at year end 2022, given the full repayment of our term loan as well as the increase in stockholders' equity both of which I just referenced with my portion of this morning's prepared comments complete I will now give the call thankfully back to Tony.

Anthony J. Guzzi: And I'm going to start on page 12, we really can.

Anthony J. Guzzi: Think of this the way we talk about earnings as we just talked about everything that happened in the past in this next section is all about the future.

Anthony J. Guzzi: And if you go to page 12, we've talked about this chart probably about three quarters ago, we started talking about it.

Anthony J. Guzzi: And I look at this as a resource allocation chart it not only of forms how we allocate resources.

Anthony J. Guzzi: Two.

Anthony J. Guzzi: Drive organic growth for this chart also informs our capital allocation decisions, which we'll talk about later.

Anthony J. Guzzi: When you think about this chart and moving left to right and there'll be some intermixing.

Anthony J. Guzzi: The first part of the electrification EV value chain, it should trend and theres been a lot in the news lately about what's happening is installing and all that.

Anthony J. Guzzi: In our world, it's not right now because of where we played.

Anthony J. Guzzi: For us has mainly been about fire life safety and utility scale charging stations and now solar starting to come back up on the radar.

Anthony J. Guzzi: But the way I think about this this is a major transformation, whether evs and the electrification is 10% of vehicles, whether it's 15% of vehicles, whether it is 30.

Anthony J. Guzzi: Clearly the policy got a little ahead of the technology here, but thats. Okay. At the end of the day all of these facilities will be built.

Anthony J. Guzzi: Some of them the battery infrastructure is going to have to be built again, no matter what penetration it as it's a lot more than it is today and the utility scale charging stations that we participated in either at major hubs of transportation and some of this is well underway because it makes sense, especially for delivery vehicles and other things that have lighter weights.

Anthony J. Guzzi: The solar is just starting to re engage in our part of the world and we do that mainly in electrical we do that some in the electrical segment. Some of the sub utility scale and building services and we'll talk about that later, but then at scale, we do it in industrial services through our electrical business there.

Anthony J. Guzzi: We have great capability, there and it's also supported by the IRA and government incentives.

Anthony J. Guzzi: And we are privileged to be able to either do that with union labor, where applicable or we have the necessary prevailing wage experience and apprenticeship programs in the nonhuman world to be able to do that and you'll hear that theme across some of these trends.

Anthony J. Guzzi: Then you get to the high Tech manufacturer me on electrification EV value chain pretty good market. What we're building we're going to continue to build.

Anthony J. Guzzi: All big markets go through periods of up and down but the long term trend I think is intact and again, whether 7%, 15% or 30%. There is a lot of facilities a lot of utility scale charging that needs to happen and if we just get a share of the solar market going forward, we will see that in our industrial services segment.

Anthony J. Guzzi: You go to a high Tech manufacturing life Sciences, and you really got to look at this box and draw a little loop down to re shoring and near shoring.

Anthony J. Guzzi: We learned and cover the supply chain's Warner's resilient as they should be I don't think we learned that we probably knew that but we needed a lesson like that so we're seeing our customers move their supply chains back onshore this was happening even before COVID-19 because the wage differential versus the transportation.

Anthony J. Guzzi: The uncertainty of transportation was not what it was in automation allow you to make up for a lot of that wage differential.

Anthony J. Guzzi: But you are really seeing it semi conductor manufacturing of which we're such a big part of and we've expanded where we can do that we only can do that in a couple markets before now we can do that and double that number. So we were two before now we're four to six.

Anthony J. Guzzi: And that is for us weighted towards mechanical but electrical we still do that work there and fire life safety.

Anthony J. Guzzi: So were represented all trades, but weighted more towards mechanical and you see that in <unk> and.

Anthony J. Guzzi: When you go to pharma biotech life Sciences again, there's two things happening there there is re shoring.

Anthony J. Guzzi: And we're in a lot of the right markets to make that happen whether it's the Carolinas.

Anthony J. Guzzi: A California, Indiana, or New Jersey, but Theres also an explosion of new drugs, specifically around weight loss.

Anthony J. Guzzi: <unk> new lines are being added new capacity and we're part of that and Youre also seeing in this high tech manufacturing life savings near shoring.

Anthony J. Guzzi: These major tech companies building hubs outside of Silicon Valley, whether it be in research Triangle Park, Texas, or Arizona again places, we're well positioned to take advantage.

Anthony J. Guzzi: Of helping our customers and again you go to the government incentives, it's focused on getting skilled trade labor on the job that has trained the right way. We do that is through our our union relationships or through skilled apprenticeship programs and you have to understand how to work in a prevailing wage world.

Anthony J. Guzzi: Expert at that and our subsidiary Ceos, Our segment leadership and our corporate leadership knows how to put the right parameters around that to make sure that we comply with what we told our customers were sure. They qualify for the incentives that they want to receive.

Anthony J. Guzzi: Then you move to the right and again part of that high Tech manufacturing is driven by AI and data center build out go to data centers were really good.

Anthony J. Guzzi: And we've been really good at this for a long period of time. We started this back in the early two thousands there was a little bubble up in 2010 and 11, we kept that capability and that leadership, we have in our electrical mechanical segments.

Right thing to do it's the most cost effective thing to do over the long term.

And nobody does that better than our EMCORE mechanical services businesses.

Building services also partly in our mechanical construction business you had a lighting is good and all that.

Given but the complex things, we can do around HVAC design and what we can do with building control systems. We do that world class. We are the one of the leading applied building controls companies in the country and we can deliver superior results for mechanical solutions for our customers and we've expanded our ability to do that with some recent.

To talk about water and.

<unk> waste reduction talk about the building envelope as part of someone's else drive to get facilities rationalization and energy efficiency.

Sometimes you'll see these things coupled with an alternative energy solution or cogent solution, where they'll add solar they'll add a co gen solution, where youre taken steam and converting it into.

Calling or youre converting it into power.

We have folks in the field, we have great engineers and know how to do that work within the built space to drive great energy efficiency and superior results for our customers and reduce their energy needs. So I could stop there we can stop talking about the future, but we're going to go now shift to page 13, and talk about <unk> and how that page page 12.

<unk> manifest itself into <unk>, I mean, ultimately great trends, but if you don't know how to capitalize and turn it into projects really doesn't mean a whole lot.

So you look on page 13, you can see the impact of those major trends and our peers total company <unk> at the end of 2023 were over eight 8 billion.

Almost $1 4 billion or almost 19% over the December 2022 total of $7 5 billion. Additionally.

Additionally, fourth quarter project bookings were strong with <unk>, increasing $212 million from September 32023, domestic construction services <unk> stand at seven 3 billion.

A record up $1 3 billion from December 2022 in line with strong project demand across most of the market sectors in which we operate and then we've seen that throughout the year.

Building services, which are anchored by energy efficiency projects and retrofit projects and 2023 with a healthy project pipeline.

And also exemplified by almost $1 3 billion of <unk> <unk> by market sector show, a balanced end market segmentation bridging back to the previous page of organic growth trends in the marketplace.

Looking into the actual activity high tech.

Networking communications, which includes Hyperscale data center work.

And then almost $1 6 billion.

$578 million or 59% from December 31, 2022 healthcare project demand continues to be strong as we have over $1 billion in healthcare <unk>.

Which is primarily made up of new hospital construction or expansion projects.

Board is Miami Dade County, and also the West Coast of Florida from targeted projects from Tampa to Naples, reassuring of near shoring trends continued for our manufacturing industrial customers reflected an $808 million in project Rps. During the year. We also saw increases in transportation and short duration projects par.

Actually offsetting these <unk> were decreases in commercial as primary primarily driven by warehouse and hospitality project. However, with respect to warehouses, we are seeing an uptick activity or cold storage warehouses and upgrades in those cold storage warehouses for our fire life safety services and projects as customers introduce.

More automation and changed warehouse configuration as.

As the calendar moves into 2024, we continue to see strong multiyear growth characteristics and many of the market sectors. We serve.

Our scale and operational excellence sets us apart from others in the marketplace and make our operating companies some of the most capable partners for our customers.

As the diversity in our Rps demonstrates we have the flexibility and capability to move across these sectors to address trends in the markets as they arise.

As we progressed through 2020 for the patient compositions of Ipos may change based on the way our customers contract with us as we become more familiar and part of their site buildup. Once we are on a customer site frequently or sometimes subsequent portions of the project of the site are awarded and scopes of work that are smaller than the initial award and second supply chain.

Issues and lead times are now being factored into the initial planning thus avoiding the previous delays led to some of the buildup in <unk>, especially in building services.

With respect to capital allocation, which I'm going to show it to you on slide 14, Our board has approved an increase in our quarterly dividend from <unk> 18 per share to <unk> 25 per share we.

We have a good acquisition pipeline intend to use some of our firepower to execute deals.

We recently signed definitive agreements to purchase that company in Texas, and one in the greater Atlanta area, both of which add capabilities to our mechanical construction segment.

Also bought a company or signed an agreement for our company, which will be a bolt on for our mechanical services Division.

We expect to spend around $140 million in aggregate upfront purchase price in connection with these acquisitions, we expect to close these acquisitions as we move further into 2024 and will take the opportunity to expand our capabilities and increase our geographic reach to better serve our customers.

We can perfect companies with the right skills and culture.

We like our pipeline of deals, but as I've always said deals happen when they happen.

Now, let's turn to page 15 and 16.

Our exceptional performance in 2023 resulted in three meaningful guidance increases in 2023, as our operating margin strengthened throughout the year, primarily because we perform well and efficiently and efficiently differ.

A difficult and complex projects some.

Some of these projects.

Projects had favorable contract terms and what that really means is we don't get into protracted disputes with our customers we work to finish the job together.

And we had some outstanding disputes that we successfully resolved in 2023.

As we set guidance for 2024 it is important to remember what I mentioned earlier at the start of this call.

We're coming off a three year CAGR.

Nearly 28%.

And we had 65% growth in earnings per share this past year.

We do expect to continue to grow earnings for our shareholders. This year for 2024, we will set guidance at 13 $5 billion to $14 billion revenues.

At 14 to $15 and diluted earnings per share.

Our guidance assumes strong operating margin performance.

Our guidance assumes strong operating margin performance as previously discussed we start the year with excellent <unk> in our electrical and mechanical construction segments and a good base of <unk> and our mechanical services division within our U S building services segment.

However.

We have nearly $300 million in revenue headwinds in the U S and UK building services segment combined.

They are coming from the result of loss of facility services contract that we lost on rebid, despite strong customer scores service.

Growth.

Okay.

Sure.

We still expect low to single mid single digit growth.

Okay.

We implemented.

And U S building services.

All regions.

As reflected in our Rps as discussed previously we.

Okay.

With higher higher.

In the past.

We continue work.

Increased parts used for growing.

And when work an important and strategic sector.

<unk>.

We are executing our work efficiency and precision.

Yes.

And then primarily.

Our operating margins.

These benefits.

We are utilizing pre fabrication labor and our labor and supply management capabilities.

All three of them.

Yes.

We shipped 100 gig.

And I kind of delivering results for our customers and shareholders.

Essentially.

As I've stated on previous calls it is important to remember that operating margins can fluctuate.

Versus the prior year.

Okay.

1100, more lowering both prior periods.

Based on mixed execution of existing projects.

These declines were within health.

Blake Mueller: We drive our operating margin performance in terms of ranges over eight quarters.

Yes.

As a result of solid.

Blake Mueller: <unk> 2023 operating margins most of our segments, which were at or above the high end of our goods are mortgages.

Yeah.

Okay.

Unit.

So you have roughly.

Blake Mueller: And our mechanical construction segment.

This decrease.

Speaker Change: We've shown resilience to deal with supply chain issues continue.

Yes.

Bye.

Yeah.

If.

Okay.

Thanks.

Hum.

Yes.

The better terms are mainly focused around liquidity in the project.

<unk> cash flow.

The project moving.

It wouldn't be an issue with us, but we negotiate hard for those.

Because the better the cash flow and the project is typically the projects moving well.

Secondarily, the better term it around okay. If we're going to expand scope with a method for which we're going to expand scope. So.

So we don't get into these.

Change order discussions that are extended in really affect productivity and.

Some of it's around general conditions, the realization that we want people to have the right general conditions to be able to execute the project well and finally I think the better contractual terms around.

<unk>.

How things convert whether they go from a fee based contract GMP to a fixed price and wouldn't be the mechanism to do that you put all that together, yes, I think that the larger the project right now the more of those terms are favorable both for the owner and for us.

Clear eyed view of how we're going to work together.

Okay, Great and then.

Comparing year Rps to last year.

The rps to be executed within the lot. The RPM is kind of beyond one years down compared to that same number last year and I guess Tony. The question is is the response there what you said in the opening commentary that you may be on these customer sites already and so you can essentially to return to work faster and more too.

And that no thats basically it coupled with the patient timing of some of this large work.

And time is money, especially in the datacenter space.

And.

As a result, you have to be pig sophisticated contractor.

Has the financial resources to mobilize on our site be able assemble a trained right.

Workforce with the right training on a job that might've been in planning, we get it we may have a month and a half to mobilize within four months, we're at full production and with a nine months. Some of these big data center jobs, what we do on the fifth.

But the guts of it are done.

Okay and then if you go on either side of that and then it would be.

What are the other side of that if youre already at a significant semiconductor site or a E V site or even a health care facility or a manufacturing site. There's a lot of work that has to get done initially to set utility infrastructure.

And mobilize and get everybody to say, okay, we're going to be here, but then as they build it other parts of the site at totaling other things you may get that in an award that will build to something almost the same size.

In chunks that are 15% to 20% of what you'll ultimately all overdue on that scope.

Got it and then tell me again.

Employee head count bigger annual increase last year then.

We have seen since the onset of the pandemic from the company I guess Tony.

Like you have the right amount of.

Human capital to address the opportunities you see out there is that an impediment to you by any means just curious if it hasn't been an impediment yet Bret we haven't we always say that we're always with an eye towards that we've always had good success building at the impediment actually will find that skilled tradespeople. It's how quickly we can develop format.

And I'll quickly develop project managers to move from being.

Someone that was helping them on the job or was an assistant foreman to move up to one big work Likewise with.

Our project managers.

We've also had pretty good success, attracting when youre winning people like <unk>.

And we've also had pretty good success attracting skilled.

Skilled format and project managers.

From other parts of the country, where we're building out some of these sites from other companies.

And also from other industry.

Yeah.

Great just last one mark.

The free cash conversion noticeably strong this year as compared to the last five years has taken away two.

<unk> 2020, Covid, but.

Can we think this conversion rate can continue.

The guidance you've given here.

Unfortunately in our Brent I think as Tony mentioned with regards to <unk>.

Some of our contract negotiations, where some of our larger more sophisticated work.

We've been successful in making sure that we're staying ahead of the curve with regards to being provided the necessary working capital to complete those jobs.

Just on advanced billings and payments.

We cannot continue the cycle of collecting more cash than debt income earned I don't think any company can.

So I suspect 2024 is going to look more normal.

So I think an appropriate benchmark would it be 2022 or 2021.

Yes, plus or minus yeah, and a lot of that once again.

Sound like a broken record as this is highly determined based on progression of work.

But at the end of the day.

We much rather be in the position. We're currently in and on the other side of the curve with regards to trying to chase collections. Once a project is complete so.

Blake Mueller: We've always looked at cash flow.

Blake Mueller: If youre, earning at net income.

The business is in pretty good shape right.

Speaker Change: And if we are in.

Speaker Change: Our construction businesses fashion, we think 75%, 75% to 80% of op income that means our project portfolio is usually pretty good at and that we don't have a lot of.

Blake Mueller: Jobs that are eating cash because they are in some form of dispute or their delay or anything. So when you. When you are over performing like we did this year versus operating like Mark said, it's got to specifically go to the mobilization we had on some of these big sites.

Speaker Change: We negotiate really hard upfront to make sure that we're not have a big cash drain as we mobilized on these sites.

Sometimes that takes a lot kind of negotiate that and also subtype will start on that one form of contract structure.

Blake Mueller: And over time that contract structure will change from a fee based or TM plus to more of a fixed price of oil because now we know what cost put labor on the site. We know the composition of the workforce, we're going to work for us for the next three or four or five years, hopefully and then we know the.

Blake Mueller: The owner and the Gcs and the engineering firms, we're going to work with how they get change orders down and how they get moved.

Blake Mueller: And so we.

Blake Mueller: We have great folks on the ground that no. This art, it's not a science, it's an art and they do it really well and they are all experienced people help them.

Blake Mueller: Quarterback that.

Blake Mueller: And it's really the power of our corporate segment and subsidiary teams working together.

Blake Mueller: To bring that home on our site and to bring the cash flow.

Blake Mueller: Not to belabor the point, but when we look at kind of a normalized historical cash flow rate over the last couple of years and we adjust for some of the impacts we saw with Covid, whether it was deferred FICA payments I think a reasonable kind of historical averages somewhere between 70 and 80% of operating on a consolidated basis, which gets you that net income or a little bit above.

Speaker Change: That makes sense.

Anthony J. Guzzi: That makes sense I appreciate all the help thank you.

Anthony J. Guzzi: Okay.

Anthony J. Guzzi: Okay. Our next question comes from Adam <unk> of Thompson Davis. Please go ahead.

Anthony J. Guzzi: Hey, good morning, guys good morning, Adam.

Adam: Mark Kevin I'm really sorry to see you go.

Mark: Congrats on hugely successful careers at EMEA.

Speaker Change: Thank you I guess I wanted to start on.

Mark A. Pompa: Peers, so commercials, obviously down year over year, which is not.

Speaker Change: So my question would be do you think these other segments can continue to offset commercial weakness.

Mark A. Pompa: I think.

Mark A. Pompa: Adam with guidance out of 13, 5% to $14 billion, knowing that not all our revenues and <unk> that we feel pretty strongly that these other trends will continue through the year.

As far as <unk> go there could be fits and starts in the <unk> and some of these segments work gets wet.

Mark A. Pompa: But we feel really good about page 12, and the underlying drivers of our business and we think that we will continue to win and the good news for US is we're balanced across market sectors.

Mark A. Pompa: So as I talked about on page 12.

Mark A. Pompa: The skilled trade because these are complex projects.

Mark A. Pompa: And then when we share knowledge, so well across our company on how to build and means and methods.

Mark A. Pompa: That our supervision can deploy that skilled trades on any number of industries once they get going.

Mark A. Pompa: And that's been the strength of EMCORE over a long period of time and we expect to continue to be so so the answer short answer is yes.

Speaker Change: I gave you a shocking thing here Adam.

Mark A. Pompa: Over the last seven eight years, maybe a couple of mixed use buildings.

Mark A. Pompa: But as far as commercial skyscrapers, where we were the core person doing the core building shell and everything else was with that not talking about tenant fit out on commercial.

Mark A. Pompa: I think we've built two mark right.

Mark A. Pompa: Nine years now we have one underway right now there's really delayed projects from 2017, and it's going fine.

Mark A. Pompa: But that's not been the heart of <unk> business for a while.

Mark A. Pompa: We still are big and the tenant fit out place, which where we operate I always like to say we had EMCORE operate.

Mark A. Pompa: An earn in the class a office space for.

Mark A. Pompa: For tenant fit out and retrofits of everything and we occupy class B and C space because of the nature of what we do.

Mark A. Pompa: So where we operate we're fine.

Mark A. Pompa: Still buoyant modern movement.

Mark A. Pompa: We're reconfiguring figure and Workspaces.

Mark A. Pompa: New buildings and then if you go to the other side of that.

Mark A. Pompa: On the BMC space quite frankly, it's not a bad time to be looking for space.

Mark A. Pompa: No.

Yeah.

Speaker Change: Tony Fire life safety do you think it makes sense to break that out as a settlement here.

Speaker Change: No I don't think so clearly youre seeing good trends and I'm just I'm curious on forward trends there.

Mark A. Pompa: Yes, it's such an integral part of mechanical and how mechanical jobs thought about and it's such a hard about our of our shops and everything it would be hard to break out because it's ingrained in some of the companies and how they operate.

Mark A. Pompa: That being said, it's important part of our business and.

Mark A. Pompa: It has a real success factor with our customers to deliver results on very complicated facilities across the country that has some unique characteristics.

Mark A. Pompa: That make it on a trade delivery standpoint, it is a national Union right. Most trade businesses don't have a national Union.

Mark A. Pompa: Like the rest of the mechanical business, it's gravitated more towards prefab like the rest of the mechanical business.

Excellent and Kraft in the field and multi discipline, they can do multi sized pipe.

Mark A. Pompa: And really engineering. So it also has more of a design assist element as the rest of the mechanical business has gravitated towards so that's why it's so integral to that mechanical business.

Mark A. Pompa: And it really wouldn't make sense to have it look different than the rest of the mechanical business.

Speaker Change: Okay, and then just last one on data centers.

Mark A. Pompa: Big Tech Company said.

Mark A. Pompa: U S data center capacity I think I said will double in the next five years. So I'm just curious what your funnel kind of matches that comment.

Mark A. Pompa: We've done a lot of work around it we think it grows high single digits to mid teens for a while.

Mark A. Pompa: Yes.

Speaker Change: Perfect. Thanks, guys.

Mark A. Pompa: The next question comes from Alex Dwyer of Keybanc capital markets. Please go ahead.

Alex Dwyer: Hi, guys, congrats on the quarter and congrats Mark and Kevin on the successful careers.

Alex Dwyer: Thanks Al.

Alex Dwyer: All right can I just start off with can you talk about.

Alex Dwyer: Semiconductor in the chipset opportunity set.

Mark A. Pompa: So we're seeing more theres more grant funding coming to market.

Mark A. Pompa: Past couple of weeks in the next coming weeks, but Theres also been some major fab project delays I'm just wondering how we should think about.

Mark A. Pompa: Option opportunity set over the next 12 months in light of these two diverging signals.

Mark A. Pompa: Next 12 months good.

Speaker Change: I mean, its next 12 months, we have most of it already in <unk>.

Speaker Change: And we know what the work will be doing on some of these critical sites.

Mark A. Pompa: When you think about the delays actually that's not bad for us in some cases, we're building the infrastructure around that they have to staff. It allows the sites to become much more after the initial bill they start to winnow down to the contractors that are the winners on that site and have done great work for them on the sites that we are we emphatically are those.

Mark A. Pompa: Factors.

Mark A. Pompa: Mhm.

Speaker Change: And then how would you compare and contrast, like the semiconductor build out versus the data center build out in terms of like the duration of the cycle and based on what are you hearing from your customers on discussions on plans I'm just trying to wonder like has won a five year cycle has won a 10 year cycle, just any thoughts on duration of the two cycles.

Speaker Change: I don't really have.

Speaker Change: Where contractors, we tend to look at things in three to five year cycles and as we look at things over the next three to five years, we feel pretty good about that again, we can deploy our resources to the best opportunities.

Mark A. Pompa: Secondarily I gave you a real world case, if someone comes in.

And the semiconductor market is going to be strong in a market. We have our share of work or maybe we're not even playing in the semiconductor market and that market.

Mark A. Pompa: The rest of the work that happened around that because they're usually becomes a point infrastructure or as part of that.

Mark A. Pompa: Whether it would be.

Mark A. Pompa: Warehousing, whether it be health care the area tends to grow we may do all those jobs and not through the semiconductor work for us it's a matter of resource allocation, how better stop the jobs and what the best opportunities are data center I said to get both of them.

Mark A. Pompa: Really strong for next three to five years.

Mark A. Pompa: I would say the data center business.

Mark A. Pompa: Is a much more.

Mark A. Pompa: Table business, and how theyre going to staff it because they don't think about a data center. They don't they have to get the technology right and there are a lot of know how to do that and to think in a new redesign.

Mark A. Pompa: The data center.

Mark A. Pompa: Human resource and have it all on the construction side.

Mark A. Pompa: The actual operating of the datacenter requires very few people. So once they get them up and running it's a much easier for them to think about capacity planning.

Mark A. Pompa: Contrast that with the semiconductor world you have some of them have a established work forces and some of these markets. They have a much easier time thinking about expansion and growing for someone that comes in new the first time they may hire.

Mark A. Pompa: One and a half workers to workers for everyone that is going to stick with them on the production side the construction side.

Mark A. Pompa: Theres a workforce that knows how to do that work after the first one the construction folks aren't the issue.

Mark A. Pompa: We would say that.

Mark A. Pompa: I don't want say slowed on a more thoughtfully planned next three or four phases on that once you get up and running running led to a much more orderly construction site, we know how to work together and it goes on where all four of them, taking their time and getting them staffed correctly.

Mark A. Pompa: Becoming successful versus just Bill Bill Bill.

Mark A. Pompa: It's better for us in our planning it's better for them also.

We are bullish on both data center does not have the human resource issue. After the fact that semiconductors does.

Speaker Change: Thank you very helpful.

Speaker Change: Got it.

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

Anthony J. Guzzi: Thank you all.

Anthony J. Guzzi: We look forward to hearing and working with you all in 'twenty 'twenty four.

Speaker Change: And with that.

Speaker Change: We now put a wrap on 2023.

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

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Hum.

Speaker Change: Yeah.

Speaker Change:

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

My name is Allen and I will be your conference operator today at this time I would like to welcome everyone to the Amcor group fourth quarter and year end 2023 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.

Star then the number one on your telephone keypad, if you would like to withdraw your question. Please press Star then two please note. This event is being recorded I would like to hand things over to Mr. Blake Mueller with FDI consulting you may begin.

Thank you Alan and good morning, everyone. Welcome to the EMCORE Group Conference call. We are here today to discuss the company's 2023 fourth quarter and full year 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, Blake good morning, everyone and as always thank you for your interest in EMCORE and welcome to our earnings conference call for the fourth quarter and full year 2023.

For those of you who are accessing the call via the Internet and our website welcome to you as well and you've arrived at the beginning of our slide presentation that will accompany our remarks today.

We are on slide two.

This presentation and certain forward looking statements and May also contain certain non-GAAP financial information.

Page two 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 slide.

Slide three depicts the executives who are with me to discuss the quarter and full year 2023 results. They are Tony Guzzi, Our chairman President and Chief Executive Officer, Mark Pompa, Executive Vice President and Chief Financial Officer, Jason now banned in our senior Vice President and Chief Accounting Officer, Maxine Mauricio Chief.

Straight of Officer, Executive Vice President and General Counsel, and Andy Backman, Vice President Investor Relations.

For call participants not accessing the conference call via the Internet. This presentation, including the slides will be archived in the Investor Relations section of our website under presentations.

You can always find us at EMCORE group Dot com and with that said, please let me turn the call over to Tony Tony and Thanks, Kevin Good morning, and thank you for joining us for our 2023 full year and fourth quarter earnings call.

Before we begin though I would like to recognize two of our executives.

Mark Pompa and Kevin Matz.

As we have previously announced Mark and Kevin will close at two remarkable EMCORE careers on April one.

I want to thank them for their hard dedication hard work dedication to EMCORE.

And you've been great teammates.

I know they both share our excitement about the future at EMCORE as Jason will take the helm as our CFO.

Andy will take over Kevin's Investor relations responsibilities.

I also want to recognize the promotion of maximum ratio to chief administrative officer.

As she assumes some of the oversight duties previously held by Kevin.

Thank you again to Kevin and Mark.

Congratulations to Jason and Maxine.

And our continued warm welcome to Andy who joined US This last fall.

Now I'd like to turn you to page four to six and that's where I'm going to start my comments.

Going to focus most of my comments on our full year 2023 results.

Mark will go into more detail about our fourth quarter.

We had a great fourth quarter at EMCORE, we outperformed our expectations, earning $4 47 per share on three four.

$4 billion in revenue.

Which represented 16, 2% organic revenue growth.

Our fourth quarter operating margin was exceptional at eight 4%.

Fourth quarter <unk>.

It out an excellent 2023 by any measure.

We did have an incredible 2023 with revenue of $12 $6 billion.

Representing growth of 13, 6% on organic revenue growth of 12, 6%.

Our earnings per share increased by approximately 65%.

And our operating income up $875 $8 million grew 55% over that of 2022.

With record annual operating margin of 7.0%.

Operating cash flow of $900 million represented.

It represented a conversion in excess of 100% of operating income.

We had a lot go right for us in <unk> 2023.

And this incredible performance is a testament to our leadership at all levels of our company, including our segment and subsidiary leaders.

Who have delivered exceptional results for our customers shareholders.

Blake Mueller: And teammates over an extended period of time.

Blake Mueller: Over the last three years, we have more than doubled our earnings per share.

Blake Mueller: With a compound annual growth rate.

Speaker Change: Of 28% in a difficult and uncertain business environment.

Speaker Change: Our teams drive our results by a relentless focus on long term growth.

Blake Mueller: Productivity and innovation.

Blake Mueller: Balanced capital allocation.

Blake Mueller: And we live our core values of mission first people always and they've been embraced throughout our company.

Kevin Matz: We also have strong workforce training and development programs.

Speaker Change: We're fortunate to operate in large growing market sectors like high Tech manufacturing networking communications manufacturing and industrial.

Blake Mueller: These sectors as well as our energy retrofit projects.

Blake Mueller: Benefiting from long term secular trends.

Blake Mueller: They require excellence and specialty trade contracting.

Blake Mueller: We have challenges, but we have met them and we'll continue to meet those challenges with resolve and with a strong focused execution at every turn.

Blake Mueller: We finished the year with our RPI is at an all time high of $8 $85 billion.

Blake Mueller: Which represents two 5% sequential growth from September 32023.

Blake Mueller: And 18, 6% growth over the year ago period.

Blake Mueller: Now I'm going to probably share some highlights from our segments.

Blake Mueller: We had excellent performance in each of our mechanical and electrical construction and U S building services segment.

Blake Mueller: Mechanical construction had an especially sellers 2023.

Blake Mueller: Operating results of our industrial service segment continue to improve at a measured pace and despite unfavorable economic conditions. Our UK building services segment is reporting solid operating income and operating margin there.

Speaker Change: The continued strength of our electrical mechanical construction segment as evidenced by 2023 revenue growth up 14, 4% at 18, 2% respectively.

Adam: With 2023, electrical construction operating margin of eight 3%.

Anthony J. Guzzi: Mechanical construction operating margin of 10, 5%.

Speaker Change: The conversion from revenue to operating income by these segment has exceeded our.

Mark: <unk>.

Speaker Change: And really as a result of excellent execution adaptability Smart project selection and favorable contract terms.

Speaker Change: And the construction segments, we selected key market sectors estimated negotiated in one meaningful projects planned and executed such projects well as safely deployed our highly skilled labor with strong productivity.

Mark A. Pompa: Our teams have increased productivity by pulling bim or building information modeling and pre fabrication add scale, while sharing best practices on construction means and methods across our company.

Mark A. Pompa: Said simply we have learned from both our successes and failures then deploy those learnings across our company to drive excellent results for our customers as superior financial returns for our shareholders.

Mark A. Pompa: In our construction segments, we continue to win and complete some of the most sophisticated projects in markets such as high Tech manufacturing.

Mark A. Pompa: Which includes semiconductors, the EV value chain biotech life Sciences and pharmaceuticals.

Mark A. Pompa: Network and communications sector, which encompasses our datacenter work and the manufacturing sector, which is being driven by reassuring domestic capacity expansion and also includes the renewable energy projects. We're working on and we have continued to see growth in our healthcare sector.

Mark A. Pompa: As a reminder, our mechanical product offering is broad across applications, such as HVAC process piping plumbing fire protection and life safety.

Mark A. Pompa: We are operating in key geographies, where such projects are in process and our life safety group has the capability to move across the country. We are positioned well with the right resources in the right market sectors and geographies to continue to win complex projects that allow us to perform well for our customers.

Mark A. Pompa: Our electrical and mechanical construction teams have deep expertise in data center market, which allows us to serve our customers with the right solution delivered under the most demanding schedules with excellent outcome for our customers.

Mark A. Pompa: As I have mentioned on earlier calls.

Mark A. Pompa: Our segment our subsidiary management teams are leading in an exceptional way and allocating our resources in a thoughtful and pragmatic way, we continue to strive to optimize our project mix to produce great financial results.

Mark A. Pompa: Our U S building services segment continues its record of steady and impressive performance and it has a strong mix of work across the service lines.

Anthony J. Guzzi: This segment's revenues grew 13, 3% in 2023 with an operating margin of five 9% demand persists for our mechanical in our mechanical services vision with excellent execution across retrofit projects building controls and maintenance and repairs.

Mark A. Pompa: We are working across a variety of end markets and our customers remain focused on energy efficiency and indoor air quality upgrades. The mechanical services business drove the robust performance of this segment in 2023 due in large part not due in large part due in part to a strong repair service season. This past summer.

Mark A. Pompa: As heat and humidity blanket most parts of the country.

Mark A. Pompa: The site for our services Division continues to deliver entering into multiyear facility maintenance contracts to leverage our self perform operating model for skilled tradespeople and operating engineers.

Mark A. Pompa: Our opportunities for growth remain in this area. These facility services contracts. It takes some time to ramp up and the scope of these contracts can reduce expand or be terminated overtime and upon rebid. We have seen some contract duration as the real estate facilities see providers are especially.

Mark A. Pompa: <unk> aggressive on price and scope on some of these contracts as they are struggling in their commercial real estate businesses. However, we will remain disciplined and not take any low price low opportunity contracts. Our industrial services segment improved in 2023 and had sustained performance improvement over the last two years.

Mark A. Pompa: Operating income improved by nearly 80% in the year, albeit from a low base, we had more turnaround seasons in 2023, and we had strong results from our new services like heater repair.

Alex Dwyer: We are experiencing greater levels of capital spending within our shop services division in the form of increased new build heat exchanger orders and have benefited during the year from certain renewable fuel projects.

Speaker Change: We are just starting to see the resumption of demand for utility scale solar projects currently impacted by supply chain and permitting issues are industrial services electrical team has us positioned well in the solar market and that position should continue to improve our U K segment performed in a manner consistent with the.

Mark A. Pompa: Global market opportunities in 2023, the competition on some contracts as fierce as the UK economy is not strong and similar to the U S facility services market, we see the real estate companies bidding on contracts had aggressively due to weakness in the UK commercial real estate market.

Mark A. Pompa: Over we have a durable base of facility services contracts will build on that base and serve our customers well and all we experienced a reduction in annual revenues. When this segment, we are executing well as shown by the five 9% operating margin for the year.

Mark A. Pompa: Our balance sheet remains strong and supports our organic growth and it provides us with the capital needed to expand our pre fabrication capabilities and investment in automation and robotics.

Speaker Change: We also have the firepower to continue to make strategic acquisitions and I'm going to discuss that in more detail later without mark I'm going to turn it over to you.

Mark: Tony Thank you for those kind words, you said earlier and good morning to everyone participating on our call today for.

Anthony J. Guzzi: For those accessing this presentation via the webcast. We are now on slide seven.

Mark A. Pompa: As a reminder, all financial information discussed during this morning's call is included in our consolidated financial statements.

Mark A. Pompa: In both our earnings release announcement and Form 10-K filed with the Securities and Exchange Commission earlier today with that let's begin our review of <unk> fourth quarter.

Mark A. Pompa: Consolidated revenues of $3 44 billion increased $489 4 million or 16, 6% from the fourth quarter of 2022 each.

Mark A. Pompa: Each of our domestic reportable segments experienced revenue growth during the fourth quarter, which was the case for all four quarters of 2023.

Mark A. Pompa: 23.

Mark A. Pompa: This segment continues to experience revenue growth across the majority of the market sectors that we serve with the most significant fourth quarter revenue increases being generated within the manufacturing and industrial and high Tech manufacturing market sectors revenues of our United States Mechanical construction segment of $1 47 billion increased 339.

Mark A. Pompa: <unk> 3 million or approximately 30% from the year ago period.

Mark A. Pompa: Are driven by customer projects supporting the design and manufacturing of semiconductors as well as production and development of electric vehicles <unk> related battery technologies. This segment is experiencing strong demand for both fire life safety as well as traditional mechanical services.

Speaker Change: In conjunction with continued data center development as well as the domestic re shoring of critical supply chain by certain of our customers are the contributing factors to this segment's significant organic growth.

Anthony J. Guzzi: Both our electrical and mechanical construction segments established new all time quarterly revenue records with their fourth quarter performance.

Anthony J. Guzzi: Revenues of <unk> combined domestic construction segments totaled $2 4 billion for the fourth quarter of 2023, an increase of $389 1 million or just over 21%.

Speaker Change: United States building services quarterly revenues of $802 million increased $88 6 million or 12, 4%.

Speaker Change: Excluding incremental acquisition contribution. This segment's revenues grew 10, 9% organically given increases across each of its operating divisions with the most significant growth being generated by mechanical services within mechanical services. We are benefiting from strong demand for HVAC projects and retrofits as well as building automation in.

Speaker Change: Control services, while customer initiatives to improve energy efficiency in our indoor air quality are certainly contributing to this demand are opportunities remained broad based and are further enhanced by mandate in refrigerant phase outs. In addition, our service volume continues to grow given an increase in our customer base as well as our geographic footprint.

Speaker Change: <unk> Industrial services segment revenues of 290 to $2 5 million increased $16 2 million or five 9% quarter over quarter. This marks this segment's fourth consecutive quarter of topline growth. In addition to more normal maintenance demand, we experienced the resumption in capital spending by our customers in the pharma Newbuild heat exchanger orders.

Speaker Change: And participation in several renewable fuel projects.

Speaker Change: United Kingdom building services segment revenues of $108 $8 million represents a reduction of $4 5 million or 4% from last year's fourth quarter as referenced throughout 2023. This segment's revenues have declined due to the non renewal of certain facilities maintenance contracts, which were still active in 2022 as well as a reduction in project work from <unk>.

Speaker Change: Certain of those cost segments customers, who slowed their capital spending programs in response to macroeconomic headwinds within the United Kingdom.

Speaker Change: Please turn to slide eight.

Speaker Change: Reported operating income for the quarter was $289 2 million or eight 4% of revenues and favorably compares to $177 2 million of operating income or 6% of revenues a year ago consistent with my revenue commentary, our fourth quarter operating income and operating margin. Both established new all time quarterly records for Amcor. This was achieved.

Speaker Change: Through increased operating income in each of our reportable segments as well as expansion in operating margin in all but one of our segments specific fourth quarter operating performance by segment is as follows our U S. Electrical construction segment earned operating income of $76 3 million, an increase of $18 2 million or 31, 3%.

Speaker Change: From the comparable 2000 22 billion the reported operating margin of 10% represents an improvement from eight 1% in last year's quarter increased gross profit and gross profit margin within the institutional commercial and high Tech manufacturing market sectors were the primary drivers of this improved performance as a reminder, the results of this segment during the <unk>.

Speaker Change: Quarter of 2022 were negatively impacted by certain discrete project write downs, which totaled $10 million and reduced this segment's operating margin by 140 basis points in the 2022 fourth quarter operating income of our United States Mechanical construction services segment of $186 1 million represents a.

Speaker Change: Substantial increase of $81 3 million from last year's quarter and operating margin of 12, 6% represents an all time high for this segment.

Speaker Change: Greater gross profit dollars and gross profit margin and the majority of market sectors in which we operate driven by a favorable revenue mix successful project Closeouts and better execution were the factors behind this segment's improved performance operating income for U S. Building services was $42 1 million or five 2% of revenues, which represents a 10 eight.

Speaker Change: <unk> increase the improved year over year performance was primarily due to this segments mechanical services division given the volume growth referenced during my revenue commentary coupled with favorable execution on both our HVAC project and repair service activities. Our U S. Industrial services segment operating income of $12 6 million or four 3% of revenues.

Speaker Change: Presents an increase of just over $11 million from the corresponding 2022 period.

Speaker Change: In the quarter by improved pricing within our shop services Division, we are continuing to see operating margins of this segment move in an upward direction.

Speaker Change: UK building services is reporting operating income of $5 5 million or 5% of revenues, which compares favorably to that of the prior year period. The decrease in this segment's revenues was more than offset by increased operating margin as the segment continues to execute well across its portfolio of facilities maintenance contracts and add on project.

Speaker Change: Work.

Anthony J. Guzzi: We are now on slide nine.

Anthony J. Guzzi: Additional financial items of significance for the quarter not addressed on the previous slides are as follows quarter. Four gross profit of $617 7 million represents an all time quarterly record for the company and it is higher than the comparable 2022 periods by approximately $163 million or nearly 36% gross margin.

Anthony J. Guzzi: 18% as improved 260 basis points period over period, selling general and administrative expenses of $328 5 million represent nine 6% of revenues and reflect an increase of approximately $51 million from quarter four 2020 to SG&A for the current year's quarter includes $2 7 million of incremental.

Anthony J. Guzzi: <unk> from businesses acquired inclusive of intangible asset amortization, resulting in an organic increase of just over $48 million.

Anthony J. Guzzi: Which was largely driven by personnel costs. In addition to annual cost of living adjustments and greater employee benefit costs. Our strong organic revenue growth has necessitated increased head count across many of our businesses further the operating income outperformance across the majority of our reportable segments during the fourth quarter and full year 2023 periods.

Anthony J. Guzzi: Resulted in incremental incentive compensation expense diluted earnings per common share in the fourth quarter of 2023 is $4 47 <unk>.

Anthony J. Guzzi: Compared to $2 63 per diluted share in the prior year. This fourth quarter EPS performance like many of our financial metrics. This quarter eclipses EMCORE. Prior all time quarterly diluted earnings per share record, which was previously established during the third quarter of 2023.

Anthony J. Guzzi: Please turn to slide 10.

Speaker Change: With the quarterly commentary complete I will now supplement Tony's comprehensive introductory remarks and of course annual performance consolidated revenues of $12 6 billion represent an increase of $1 5 billion, a 13, 6% when compared to 2022. Our full year results include a $107 1 million of incremental revenues attributable to businesses acquired pertaining to the <unk>.

Anthony J. Guzzi: That such businesses were not owned by <unk> in 2022, excluding the impact of acquisitions annual revenues increased a strong 12, 6% with all of our reportable segments other than our United Kingdom building services segment generated strong revenue growth during the full year period operating income of $175 8 million or seven.

Anthony J. Guzzi: 7% of revenues represents a 55% increase from calendar year 2022, along with 190 basis point improvement in operating margin each of our domestic reportable segments as Tony commented achieved double digit increases in full year operating income along with meaningful improvements in operating margin full year diluted earnings per share was <unk> 13.

Anthony J. Guzzi: 31 <unk>.

Anthony J. Guzzi: And compares to $8 10, and the corresponding 2022 period, adjusting 2023 to exclude the third quarter impairment charge related to certain long lived assets within our United States Mechanical construction segment results in an adjusted non-GAAP diluted earnings per share of $13 34 for the year. This <unk>.

Anthony J. Guzzi: Presents a 65% improvement over 2020 two's reported diluted EPS not surprising with our strong performance throughout the last 12 months full year of 2023 represents a record year for amcor, surpassing the companys previous all time performance achieved in 2022.

Anthony J. Guzzi: We are now on slide 11.

Anthony J. Guzzi: Strength of <unk> balance sheet continues to differentiate us from our competition and provides our customer with customers with confidence as we bid on large scale and demanding projects given our balance sheet, coupled with our borrowing capacity available to us under our recently amended and extended revolving credit facility.

Anthony J. Guzzi: We remain well positioned to fund organic growth pursue strategic M&A opportunities and return capital to shareholders, our commitment to shareholder return as evidenced in part by todays announcement that our board of directors has approved an increase in our quarterly dividend of almost 40%.

Anthony J. Guzzi: Notable fluctuations in our balance sheet when compared to December of 2022 are as follows.

Anthony J. Guzzi: Cash on hand of $790 million and represents an increase of just over $333 million, our exceptional operating cash flow performance of 900 million, which Tony commented on earlier was partially offset by cash used for financing activities of just over 412 million given the repaint.

Anthony J. Guzzi: <unk> of all amounts previously outstanding under our term loan and the return of $160 million to stockholders through share repurchases and dividends as well as cash used in investing activities of $161 million for acquisitions and capital expenditures, resulting primarily from the increase in cash just referenced our working capital balances increased by just over $200.

Anthony J. Guzzi: $20 million from December of last year.

Anthony J. Guzzi: Goodwill has increased by $37 $4 million as a result of the acquisitions completed by US in calendar 2023, while net identifiable intangible assets have decreased by $7 9 million as.

Anthony J. Guzzi: As the additional intangible assets recognized in connection with these acquisitions was more than offset by $67 1 million of amortization expense in 2023.

Anthony J. Guzzi: Total debt exclusive operating lease liabilities has decreased by $241 9 million almost entirely as a result of the aforementioned repayments made on our previously outstanding term loan after considering outstanding letters of credit the remains $1 2 billion of capacity available to us under our renewed one 3 billion revolving credit.

Anthony J. Guzzi: <unk> the maturity of which now has been extended to December of 2028, our stockholders stockholders' equity balances increased by almost $500 million as our net income for the year exceeded our share repurchases and dividend payments made throughout 2023, <unk> debt to capitalization ratio has reduced to zero, 2% from 11.

Anthony J. Guzzi: 1% at year end 2022, given the full repayment of our term loan as well as the increase in stockholders' equity both of which I just referenced.

Anthony J. Guzzi: With my portion of this morning's prepared comments complete I will now give the call thankfully back to Tony.

Anthony J. Guzzi: Thanks Mark.

Anthony J. Guzzi: I'm going to start on page 12, and we really can think of this the way we talk about earnings as we just talked about everything that happened in the past in this next section is all about the future.

Anthony J. Guzzi: And if you go to page 12, we've talked about this chart probably about three quarters ago, we started talking about it.

Anthony J. Guzzi: And I look at this as a resource allocation chart. It not only of forms how we allocate resources to.

Anthony J. Guzzi: Two.

Anthony J. Guzzi: Drive organic growth for this chart also informs our capital allocation decisions, which we'll talk about later.

Anthony J. Guzzi: So you think about this chart and moving left to right and it'll be some intermixing.

Anthony J. Guzzi: The first part of the electrification EV value chain, it should trend and theres been a lot in the news lately about what's happening is installing and all that.

Anthony J. Guzzi: In our World is right now because of where we played.

Anthony J. Guzzi: For us, it's mainly been about fire life safety and utility scale charging stations and now solar starting to come back up on the radar.

Anthony J. Guzzi: But the way I think about this this is a major transformation, whether evs and the electrification is 10% of vehicles, whether it's 15% of vehicles, whether it is 30.

Anthony J. Guzzi: And clearly the policy got a little ahead of the technology here, but thats. Okay. At the end of the day all of these facilities will be built.

Anthony J. Guzzi: Some of this is well underway because it makes sense, especially for delivery vehicles and other things that have lighter ways.

Anthony J. Guzzi: The solar is just starting to reengage in our part of the World and we do that mainly in electrical we do that some in the electrical segment. Some of the sub utility scale and building services and we'll talk about that later, but then at scale, we do it in industrial services through our electrical business there.

Anthony J. Guzzi: We have great capability, there and it's also supported by the IRA and government incentives.

Anthony J. Guzzi: And we are privileged to be able to either do that with union labor, where applicable or we have the necessary.

Anthony J. Guzzi: <unk> wage experience.

Anthony J. Guzzi: And apprenticeship programs in the nonunion world to be able to do that and you'll hear that theme across some of these trends.

Anthony J. Guzzi: Then you get to the high Tech manufacturing.

Anthony J. Guzzi: On electrification EV value chain pretty good market, what we're building we're going to continue to build.

Anthony J. Guzzi: And if we just get a share of the solar market going forward, we'll see that in our industrial services segment go to high Tech manufacturing life Sciences, and you really got to look at this box and draw a little loop down to re shoring and near shoring.

Anthony J. Guzzi: We learned and cover the supply chain Warner's resilient as they should be.

Anthony J. Guzzi: We learned that we probably knew that but we needed a lesson like that so we're seeing our customers move their supply chains back onshore this was happening even before COVID-19 because the wage differential versus the transportation and the uncertainty of transportation was not what it was in automation allow you to make up for a while.

Anthony J. Guzzi: That wage differential.

Anthony J. Guzzi: But youre really seeing the semi conductor manufacturing of which we're such a big part of and we've expanded where we can do that we only can do that in a couple markets before now we can do that and double that number. So maybe we were too before now we're four to six.

Anthony J. Guzzi: And that is for us weighted towards mechanical but electrical we still do that work there and fire life safety.

Anthony J. Guzzi: So were represented all trades, but weighted more towards mechanical and you see that in <unk> and.

Anthony J. Guzzi: When you go to pharma biotech life Sciences again, there's two things happening there there is re shoring.

Anthony J. Guzzi: And we're in a lot of the right markets to make that happen whether it's the Carolinas.

Anthony J. Guzzi: California, Indiana, or New Jersey, but Theres also an explosion of new drugs, specifically around weight loss and new lines are being added new capacity and we're part of that.

Anthony J. Guzzi: And Youre also seeing in this high tech manufacturing life saves near shoring.

Anthony J. Guzzi: Of helping our customers and again you go to the government incentives, it's focused on getting skilled trade labor on the job that has trained the right way. We do that is through our union relationships or through skilled apprenticeship programs and you have to understand how to work in a prevailing wage world where expert at that and our subsidiary Ceos are.

Anthony J. Guzzi: Segment leadership, and our corporate leadership knows how to put the right parameters around that to make sure that we comply with what we told our customers were sure. They qualify for the incentives that they want to receive.

Anthony J. Guzzi: Then you move to the right and again part of that high Tech manufacturing is driven by AI and data center build out go to data centers, who are really good.

Anthony J. Guzzi: As is our fire life safety offering so what's driving demand here with driving demand as offs right. We want more and more service, we big companies like Amcor is putting more and more things in the cloud, but also the proliferation of AI.

Anthony J. Guzzi: And that needs more systems. These went from 510 15 megawatt facilities.

Anthony J. Guzzi: 50, 80 $100 million 100 megawatt facility does put that in perspective.

Anthony J. Guzzi: If you look at an office building or even a hospital complex youll get a large hospital complex that maybe has five to 10 megawatts. So think about what that one datacenter.

Anthony J. Guzzi: Is using today to drive the things, we need to be more productive or to outsource or get things into the cloud increased power requirements, then you're going to go back to the remodel of some of the data centers that were built to uplift the power in there and also have different kinds of server racks. So we not only participate on the front end electrically mechanically and.

Anthony J. Guzzi: ROIC safety, we also participate in the call today to work to allow it to be to receive the racking.

Anthony J. Guzzi: And then also finally in the retrofit and remodel.

Anthony J. Guzzi: <unk> done a lot of work around these three top trends over the past year and a half two years to understand the long term trends, we feel pretty good about where we're positioned.

Anthony J. Guzzi: Go down to healthcare EMCORE has always been world Class Hospital bills.

Anthony J. Guzzi: It's hard to go into a major city that we're in and not know that we werent part of that health care Skyline, whether it's the Texas Medical Center in Houston, whether its Massachusetts General and the whole hospital complex I'll pass Fenway in Boston, whether it's in San Diego, whether it's in <unk>.

Anthony J. Guzzi: Chicago, we're part of that health care skylights, and what we learned in Covid those facilities need to be redone. In many cases also need to be made more flexible and when you think about those health care facilities. They are rich system complex environments. They don't look other than some of the high purity things, which an operating room is.

Anthony J. Guzzi: Different in these high tech manufacturing and life science plants Theres, a lot of commonality between that hospital build and high Tech manufacturing and that allows me to talk about what we do I talked about and started this was a resource allocation game at EMCORE and figuring out where the best opportunities for us to perform performed well keep our workers safe and productive and get.

Anthony J. Guzzi: Superior results for our shareholders and so a lot of the capabilities. We've built across these different boxes, we can use in the different boxes and thats that is the wonderful thing about our skilled trades. That's the wonderful thing about our supervision and the engineering that we have at EMCORE, which is more design assist value engineering people that.

Anthony J. Guzzi: And to build right, we figure out how to make it more buildable and thats, what <unk> and pre fabrication have allowed us to do and last but not least you'll get the energy efficiency of sustainability.

Anthony J. Guzzi: Don't think any of us here to say and Jay I know energy prices are going down in the long term that can't be true because you have an energy transformation going on coupled with his great demand coming out of things like high Tech facilities data centers. The electrification. They use a lot of energy. So energy efficiency is also for owners.

Anthony J. Guzzi: And energy security people are concerned about reducing their emissions because it's not only and a lot of ways. The right thing to do it's the most cost effective thing to do over the long term.

Anthony J. Guzzi: And nobody does that better than our EMCORE mechanical services businesses.

Anthony J. Guzzi: In building services also partly in our mechanical construction business you had a lighting is good and all that that's a given but the complex things. We can do around HVAC design and what we can do with building control systems. We do that World class. We are the one of the leading applied building controls companies in the country and.

Anthony J. Guzzi: We can deliver superior results for mechanical solutions for our customers and we've expanded our ability to do that with some recent acquisitions to talk about water and.

Anthony J. Guzzi: Waste reduction talk about the building envelope as part of someone's else drive to get facilities rationalization and energy efficiency.

Anthony J. Guzzi: You'll see these things coupled with an alternative energy solution or cogent solution, where they'll add solar they'll add a co gen solution, where youre taken steam and converting it into.

Anthony J. Guzzi: Ah, calling or you're converting it into power.

Anthony J. Guzzi: We have folks in the field, we have great engineers and know how to do that that work within the built space to drive great energy efficiency and superior results for our customers and reduced our energy needs. So I could stop there we can stop talking about the future, but we're going to go now shift to page 13, and talk about <unk> and how that page page 12.

Anthony J. Guzzi: <unk> manifest itself into <unk>, I mean, ultimately great trends, but if you don't know how to capitalize and turn it into projects really doesn't mean a whole lot.

Anthony J. Guzzi: So you look on page 13, you can see the impact of those major trends and our peers total company <unk> at the end of 2023 were over eight 8 billion.

Anthony J. Guzzi: Up almost $1 4 billion or almost 19% over the December 2022 total of $7 5 billion. Additionally.

Anthony J. Guzzi: Additionally, fourth quarter project bookings were strong with <unk>, increasing $212 million from September 32023, domestic construction services <unk> stand at $7 3 billion.

Anthony J. Guzzi: A record up $1 3 billion from December 2022 in line with strong project demand across most of the market sectors in which we operate and then we've seen that throughout the year.

Anthony J. Guzzi: Building services, which are anchored by energy efficiency projects and retrofit projects and 2023 with a healthy project pipeline.

Anthony J. Guzzi: And also exemplified by almost $1 3 billion of our peers <unk> by market sector show, a balanced end market segmentation bridging back to the previous page of organic growth trends in the marketplace.

Anthony J. Guzzi: Looking into the actual activity high Tech manufacturing, which includes semiconductor pharma bio Tech life Sciences R&D the electric vehicle value chain stands at one 5 billion.

Anthony J. Guzzi: Up $686 million or 89% from year end 2022 networking communications, which includes Hyperscale data center work stands at almost $1 6 billion.

Anthony J. Guzzi: $578 million or 59% from December 31, 2022 healthcare project demand continues to be strong as we have over $1 billion healthcare <unk>, which is primarily made up of new hospital construction or expansion projects. We also currently have ipos of nearly $650 million and water and.

Anthony J. Guzzi: Water projects.

Anthony J. Guzzi: Which for US are predominantly located in Florida, Miami Dade County, and also the West Coast of Florida from targeted projects from Tampa to Naples, reassuring of near shoring trends continue for our manufacturing and industrial customers reflected an $808 million in project Rps during the year. We also saw increases in transportation.

Anthony J. Guzzi: <unk> and short duration projects.

Anthony J. Guzzi: Partially offsetting these <unk> were decreases in commercial as primary primarily driven by warehouse and hospitality projects. However.

Anthony J. Guzzi: With respect to warehouses, we are seeing an uptick activity for cold storage warehouses and upgrades in those cold storage warehouses for our fire life safety services and projects as customers introduce more automation and change warehouse configuration.

Anthony J. Guzzi: As the calendar moves into 2024, we continue to see strong multiyear growth characteristics and many of the market sectors, we serve our scale and operational excellence sets us apart from others in the marketplace and make our operating companies some of the most capable partners for our customers.

Anthony J. Guzzi: As the diversity in our Rps demonstrates we have the flexibility and capability to move across these sectors to address trends in the markets as they arise.

Anthony J. Guzzi: As we progress through 2020 for the patient compositions of our peers may change based on the way our customers contract with us as we become more familiar and part of their site buildup. Once we are on a customer site frequently are sometimes subsequent portions of the project at the site are awarded and scopes of work that are smaller than the initial award and second supply chain.

Anthony J. Guzzi: Issues and lead times are now being factored into the initial planning thus avoiding the previous delays led to some of the buildup in <unk>, especially in building services.

Anthony J. Guzzi: With respect to capital allocation, which I'm going to show it to you on slide 14, Our board has approved an increase in our quarterly dividend from <unk> 18 per share to 25 per share we.

Anthony J. Guzzi: We have a good acquisition pipeline intend to use some of our firepower to execute deals.

Anthony J. Guzzi: We recently signed definitive agreements to purchase that company in Texas, and one in the greater Atlanta area, both of which add capabilities to our mechanical construction segment. We also bought a company or signed an agreement for our company, which will be a bolt on for our mechanical services Division.

Anthony J. Guzzi: We expect to spend around $140 million in aggregate upfront purchase price in connection with these acquisitions, we expect to close these acquisitions as we move further into 2024 and will take the opportunity to expand our capabilities and increase our geographic reach to better serve our customers.

Anthony J. Guzzi: We can perfect companies with the right skills and culture.

Speaker Change: We like our pipeline of deals, but as I've always said deals happen when they happen now, let's turn to page 15 and 16.

Speaker Change: Our exceptional performance in 2023 resulted in three meaningful guidance increases in 2023, as our operating margin strengthened throughout the year, primarily because we perform well and efficiently and efficiently differ.

Speaker Change: A difficult and complex projects some.

Anthony J. Guzzi: Some of these projects.

Anthony J. Guzzi: Projects had favorable contract terms and what that really means is we don't get into protracted disputes with our customers. We work to finish the job together and we had some outstanding disputes that we successfully resolved in 2023.

Anthony J. Guzzi: As we set guidance for 2024 it is important to remember what I mentioned earlier at the start of this call.

Anthony J. Guzzi: We're coming off a three year CAGR.

Anthony J. Guzzi: Nearly 28%.

Anthony J. Guzzi: And we had 65% growth in earnings per share this past year.

Anthony J. Guzzi: We do expect to continue to grow earnings for our shareholders. This year for 2024 wheel set guidance at 13, five to 14 billion revenues.

Anthony J. Guzzi: 14% to $15 and diluted earnings per share.

Anthony J. Guzzi: Our guidance assumes strong operating margin performance.

Anthony J. Guzzi: Our guidance assumes strong operating margin performance as previously discussed we start the year with excellent <unk> in our electrical and mechanical construction segments and a good base of <unk> and our mechanical services division within our U S building services segment. However.

Anthony J. Guzzi: We have nearly $300 million in revenue headwinds in the U S and UK building services segment combined.

Anthony J. Guzzi: They are coming from the result of loss of facility services contract that we lost on rebid, despite strong customer scores on our service delivery.

Anthony J. Guzzi: Despite this we still expect low to single mid single digit growth revenue growth and U S building services.

Anthony J. Guzzi: As reflected in our Rps and as discussed previously we continue to work.

Anthony J. Guzzi: And when work an important and strategic market sectors, we are executing our work with efficiency and precision as shown by our operating margins.

Anthony J. Guzzi: We are utilizing band pre fabrication labor and our labor and supply management capabilities with an eye towards delivering superior results for our customers and shareholders.

Anthony J. Guzzi: As I've stated in previous calls it is important to remember that operating margins can fluctuate quarter to quarter based on mix execution and timing of projects.

Anthony J. Guzzi: We evaluate our operating margin performance in terms of ranges over eight quarters and our performance in 2023 unit operating margins for most of our segments, which were at or above the high end of our historical ranges.

Anthony J. Guzzi: Especially in our mechanical construction segment.

Anthony J. Guzzi: We've shown great resilience and dealing with supply chain issues and continue to develop a strong bench from former performance through project managers managers.

Anthony J. Guzzi: The senior leadership further we are tracking notable talent from skilled labor the senior project in operations management.

Anthony J. Guzzi: Our outlook for 2024 is positive and.

Anthony J. Guzzi: And for our ability to achieve the upper end of our guidance range.

Anthony J. Guzzi: Macroeconomic factors and other factors will come into play potentially.

Anthony J. Guzzi: We remain concerned with the financial risk to some customers around continued elevated interest rates and also the macro uncertainties posed by the Uva the conflict and unrest in the middle East and their impact on global energy markets and supply chains.

Anthony J. Guzzi: As well as the dysfunction occurring in the U S government, which may lead to a government shutdown or the inability of key pieces of legislation.

Anthony J. Guzzi: We also realized that our customer just the scope and timing of long term projects consistent with our immediate intermediate and long term capacity needs. Despite these challenges. We believe that we were able to navigate these uncertainties as we have as our team has shown great resiliency in the past.

Anthony J. Guzzi: We remain cognizant of these external factors and the potential impact on our execution and performance.

Anthony J. Guzzi: Going to continue to be balanced capital allocators, specifically as discussed previously there remain opportunities with in our acquisition pipeline and we just increased our dividend to <unk> 25 quarterly dividend to <unk> 25 per share.

Anthony J. Guzzi: We will continue to pursue opportunities to grow profitably, both organically and through acquisitions and our share repurchase program remains in place.

Anthony J. Guzzi: As I've said before with.

Anthony J. Guzzi: With the uncertainty in the financial markets, we believe that our strong balance sheet.

Anthony J. Guzzi: She helped us win work on large sophisticated projects.

Anthony J. Guzzi: As customers see our financial shrimp is just another reason to choose EMCORE.

Anthony J. Guzzi: As always I want to thank the entire EMCORE team for their dedication and hard work. We appreciate all you do every day for our customers.

Anthony J. Guzzi: With that I'll turn it over to you Alan to open the line for questions.

Alan: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. It. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Anthony J. Guzzi: <unk>.

Anthony J. Guzzi: Our first question comes from Brent Thielman of D. A Davidson. Please go ahead.

Brent Edward Thielman: Hey, Thanks, good morning, and Mark Kevin Congrats on tremendous contributions and careers here.

Brent Edward Thielman: Tony I heard you say twice guidance it seemed strong margin performance.

Brent Edward Thielman: <unk> heard you mentioned.

Brent Edward Thielman: Quarter, its now favorable contract term is.

Brent Edward Thielman: Is it sort of one factor here between the really strong margin, but I don't imagine that changing with the new work youre talking into the business.

Brent Edward Thielman: Are those better terms broad based is it confined to a few that really hot areas and markets within the business to fund the here yet.

Speaker Change: Let me talk about that.

Speaker Change: The better terms are mainly focused around liquidity in the project.

Speaker Change: <unk> cash flow.

Speaker Change: Keep the project moving.

Speaker Change: And that wouldn't be an issue with us, but we negotiate hard for those.

Speaker Change: <unk>.

Speaker Change: The better the cash flow and our project is typically the projects moving well.

Speaker Change: Secondarily, the better term it around okay. If we're going to expand scope with the method for which we're going to expand scope.

Speaker Change: So we don't get into these.

Speaker Change: Change order discussions that are extended in really affect productivity.

Speaker Change: All of it is around general conditions, the realization that we want people to have the right general conditions to be able to execute the project well and finally I think the better contractual terms around.

Speaker Change: How things convert whether they go from a fee based contract GMP to a fixed price and wouldn't be the mechanism to do that you put all that together, yes, I think that the larger the project right now the more of those terms are favorable both for the owner and for US. It's a clear eyed view of how we're going to work together.

Speaker Change: Okay, Great and then.

Speaker Change: In comparing year Rps to last year.

Speaker Change: The rps to be executed within the lot. The RPM is kind of beyond one years down compared to that same number last year I guess, Tony. The question is the response there what you said in the opening commentary that you may be on these customer sites already and so you can essentially.

Speaker Change: Turning to work faster, even more to it than that no thats basically it coupled with the patient to make some of this large work.

Speaker Change: Times mining, especially in the datacenter space.

Speaker Change: And.

Speaker Change: As a result, you have to be pig sophisticated contractor that has the financial resources to mobilize on our site be able to assemble a trained rigs.

Speaker Change: Workforce with the right training on a job that might've been in planning, we get it we may have a month and a half to mobilize within four months, we're at full production and with a nine months. Some of these big data center jobs, what we do on the fifth.

Speaker Change: The guts of it are done.

Speaker Change: Okay, and then if you could either side of that and then if you could.

Speaker Change: The other side of that if youre already at a significant semiconductor site.

Speaker Change: Or EV site, or even a health care facility or any manufacturing site. There's a lot of work that has to get done initially to set the utility infrastructure.

Speaker Change: And mobilize and get everybody and say, okay, we're going to be here, but then as they build the other parts of the site at totaling other things you may get that and an award that will build to something almost the same size.

Speaker Change: In chunks that are 15% to 20% of what you'll ultimately all overdue on that scope.

Speaker Change: Got it and then I thought it was.

Speaker Change: Yes.

Speaker Change: Employee head count bigger annual increased last year than.

Speaker Change: We have seen since the onset of the pandemic from the company I guess, Tony do you feel like you have the right amount of.

Speaker Change: Kind of human capital to address the opportunities you see out there is that an impediment to you by any means just curious it hasn't been an impediment yet.

Anthony J. Guzzi: We haven't we always say that we're always with an eye towards that we've always had good success building at the impediment actually will find that skilled tradespeople. It's how quickly we can develop a foreman I'll quickly developed project managers to move from being.

Speaker Change: One that was helping on the job or was an assistant foreman to move up to run big work Likewise with.

Speaker Change: Project managers.

Speaker Change: We've also had pretty good success, attracting when youre winning people like to BP.

Speaker Change: And we've also had pretty good success attracting skilled.

Speaker Change: Skilled format and project managers.

Speaker Change: From other parts of the country when we're building out some of these sites from other companies.

Speaker Change: And also from other industry.

Speaker Change: Sure.

Speaker Change: Great just last one mark.

Speaker Change: The free cash conversion noticeably strong this year as compared to the last five years taken away two.

Speaker Change: <unk> 2020, Covid, but.

Can we think this conversion rate can continue.

Speaker Change: The guidance you have given here.

Speaker Change: Unfortunately in our Brent I think as Tony mentioned with regards to some of our contract negotiations, where some of our larger more sophisticated work.

Speaker Change: We've been successful in making sure that we're staying ahead of the curve with regards to being provided the necessary working capital to complete those jobs base.

Speaker Change: Based on advanced billings and payments.

Speaker Change: We cannot continue to cycle of collecting more cash than than income earned I don't think any company can.

Speaker Change: I used to start 2024 is going to look more normal.

Speaker Change: So I think an appropriate benchmark would it be 2022 or 2021.

Speaker Change: Yes, plus or minus yeah, and a lot of that once again not to sound like a broken record as this is the highly determined based on progression of work.

Speaker Change: But at the end of the day.

Speaker Change: We much rather be in the position. We're currently in and on the other side of the curve with regards to trying to chase collections. Once a project is complete so.

Speaker Change: We've always looked at cash flow.

Speaker Change: If youre, earning at net income.

Speaker Change: The business is in pretty good shape right and if we are in the construction.

Speaker Change: <unk> businesses, Okay. So what do you think 75%, 75%, 80% of op income that means our project portfolio is usually pretty good and that we don't have a lot of.

Speaker Change: Jobs that are eating cash because they are in some form of dispute or theyre delayed or anything so when you're when you're over performing like we did this year versus operating like Mark said, it's caused specifically go to the mobilization we had on some of these big sites.

Speaker Change: We negotiate really hard upfront to make sure that we're not have a big cash drain as we mobilize on these sites.

Speaker Change: Sometimes that takes a long time to negotiate that and also sometimes we'll start on that one form of contract structure.

Speaker Change: And then over time that contract structure will change from a fee based or PNM plus to more of a fixed price of oil because now we know what it cost to put labor on the site. We know the composition of the workforce, we're going to work for us for the next three or four or five years, hopefully and then we know the.

Speaker Change: The owner and the Gcs and the engineering firms, we're going to work with how they get change orders down how they get moved.

And so we.

Speaker Change: We have great folks on the ground that no. This art, it's not a science, it's an art and a do it really well and they are all experienced people help them.

Speaker Change: Quarterback that.

Speaker Change: And it's really the power of our corporate segment and subsidiary teams working together.

Speaker Change: To bring that home on a site and to bring the cash flow of them not.

Speaker Change: Not to belabor the point, but when we look at kind of a normalized historical cash flow rate over the last couple of years and we adjust for some of the impacts we saw with Covid, whether it was deferred FICA payments I think a reasonable kind of historical averages somewhere between 70% to 80% of operating leverage on a consolidated basis, which gets you that net income or a little bit above.

Speaker Change: That makes sense.

Speaker Change: That makes sense I appreciate all the help thank you.

Speaker Change: Okay.

Speaker Change: Okay. Our next question comes from Adam <unk> of Thompson Davis. Please go ahead.

Speaker Change: Hey, good morning, guys. Good morning, Adam Good morning, I'm, Mark Kevin I'm really sorry to see you go.

Congrats on hugely successful careers in EMEA.

Adam: Thank you I guess I wanted to start on.

Adam: <unk>.

Adam: RP is so.

Adam: Commercial is obviously down year over year, which is not.

Speaker Change: So my question would be do you think these other segments can continue to offset commercial weakness.

Speaker Change: Well I think Adam with guidance out of 13, 5% to $14 billion, knowing that not all our revenues and <unk> that we feel pretty strongly that these other trends will continue through the year.

Speaker Change: As far as <unk>, there could be fits and starts in the <unk> and some of these segments work gets let.

Speaker Change: But we feel really good about page 12, and the underlying drivers of our business and we think that we will continue to win and the good news for US is we're balanced across market sectors.

Speaker Change: So as I talked about on page 12.

Speaker Change: The skilled trade because these are complex projects.

Speaker Change: And then when we share knowledge, so well across our company on how to build the means and methods.

Revision can deploy that skilled trades on any number of industries once they get going.

Speaker Change: And that's been the strength of EMCORE over a long period of time and we expect to continue to be so so the answer short answer is.

Speaker Change: I gave you a shocking thing here Adam.

Speaker Change: Over the last seven eight years, maybe a couple of mixed use buildings.

Speaker Change: But as far as commercial skyscrapers, where we were the core person doing the core building shell and everything else was with that not talking about tenant fit out in commercial.

Speaker Change: I think we've built two mark right.

Speaker Change: Nine years now we have one underway right now thats really delayed projects from 2017, and it's going fine.

But that's not been the heart of <unk> business for a while we still are big and the tenant fit out place, which where we operate I always like to say we had EMCORE operate.

In an earn in the class a office space.

For tenant fit out and retrofits at everything and we occupy class B and C space because of the nature of what we do.

Speaker Change: So where we operate we're fine.

Speaker Change: It's still a lot of movement.

Speaker Change: We're reconfiguring figure and Workspaces.

Speaker Change: New buildings, and then and then if you go to the other side of that.

Speaker Change: On the BMC space quite frankly, it's not a bad time to be looking for space.

Speaker Change: Okay.

Speaker Change: Tony Fire life safety do you think it makes sense to break that out as a settlement here.

Anthony J. Guzzi: No I don't think <unk> really youre seeing good trends and I'm, just I'm curious on forward trends there.

Speaker Change: Yes, it's such an integral part of mechanical and Hal mechanical jobs thought about and it's such a hard about our of our shops and everything it would be hard to break out because it's ingrained in some of the companies and how they operate.

That being said, it's important part of our business and.

Speaker Change: It has a real.

Speaker Change: Success factor with our customers to deliver results on very complicated facilities across the country now that has some unique characteristics.

Speaker Change: That make it on a trade delivery standpoint, it is a national Union most trade businesses don't have a national Union like.

Speaker Change: Like the rest of the mechanical business, it's gravitated more towards pre fab like the rest of the mechanical business.

Speaker Change: You have to have excellence and Kraft in the field and multi discipline. They can do multi sized pipe.

Speaker Change: And really engineering. So it also has more of a design assist element as the rest of the mechanical business has gravitated towards <unk>.

Speaker Change: So that's why it's so integral to that mechanical business.

Speaker Change: And it really wouldn't make sense to have it look different than the rest of the mechanical business.

Speaker Change: Okay, and then just last one on data centers.

Big Tech Company said.

Speaker Change: U S data center capacity I think they said will double in the next five years. So I'm just curious what your funnel kind of matches that comment.

Speaker Change: Hi.

Speaker Change: We've done a lot of work around it we think it grows high single digits to mid teens for a while.

Speaker Change: Yes.

Speaker Change: Perfect. Thanks, guys.

The next question comes from Alex Dwyer of Keybanc capital markets. Please go ahead.

Alex Dwyer: Hi, guys, congrats on the quarter and congrats Mark and Kevin on the successful careers.

Alex Dwyer: Thanks Al.

Alex Dwyer: Can I just start off with can you talk about.

Alex Dwyer: Semiconductor in the chipset opportunity set.

Alex Dwyer: So we're seeing more theres more grant funding coming to market.

Alex Dwyer: Past couple of weeks in the next coming weeks, but Theres also been some major fab project delays I'm just wondering how we should think about.

Alex Dwyer: Option opportunity set over the next 12 months in light of these two diverging signals.

Alex Dwyer: Next 12 months good.

Alex Dwyer: I mean, its next 12 months, we have most of it already in <unk>.

Alex Dwyer: And we know what the work will be doing on some of these critical sites.

Speaker Change: When you think about the delays actually that's not bad for us in some cases, we're building the infrastructure around that they have to staff. It allows the sites to become much more after the initial bill they start to winnow down to the contractors that are the winners on that site and have done great work for them on the sites that we are we emphatically are those contra.

Speaker Change: Actors.

Speaker Change: Mhm.

Speaker Change: Any thoughts on duration of the two cycles.

I don't really have.

Speaker Change: Secondarily I gave you a real world case someone comes in.

Speaker Change: The semiconductor market is going to be strong in a market. We have our share of work, where maybe we're not even playing in the semiconductor market in that market.

Speaker Change: The rest of the work that happens around it because they're usually becomes a point infrastructure or as part of that.

Speaker Change: Whether it would be.

Speaker Change: Warehousing, whether it be health care the area tends to grow we may do all those jobs and not do the semiconductor work for us. It's a matter of resource allocation I'll bet, just south of jobs and what the best opportunities are data Center I said again, both when we look really strong for the next three to five years.

I would say the data center business.

Speaker Change: Is a much more stable business and how theyre going to staff. It because they don't think about a data center. They don't they have to get the technology right.

Speaker Change: Lot of know how to do that and I think in a new redesign.

Speaker Change: The data center.

Speaker Change: Human resource and have it all on the construction side.

Speaker Change: The actual operating of the datacenter requires very few people. So once they get them up and running it's a much easier for them to think about capacity planning.

Speaker Change: Contrast that with the semiconductor world you have some of them have an established work forces and some of these markets. They have a much easier time thinking about expansion and growing for someone that comes in new the first time they may hire.

Speaker Change: One and a half workers to workers for everyone, that's going to stick with them on the production side the construction side.

Speaker Change: Theres a workforce that knows how to do that work after the first one the construction folks aren't the issue.

Speaker Change: We would say that.

Speaker Change: A.

I don't want to say slowdown a more thoughtfully plan next three or four phases on that once you get up and running fronting leads to a much more orderly construction site, we know how to work together and it goes on where all four of them, taking their time and getting them staffed correctly.

Speaker Change: Becoming successful versus just Bill Bill Bill.

Speaker Change: Better for us in our planning it's better for them also so bullish on both data center does not have the human resource issue. After the fact that semiconductors does.

Speaker Change: Thank you very helpful.

Got it.

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

Anthony J. Guzzi: Thank you all.

Anthony J. Guzzi: We look forward to hearing and working with you all in 'twenty 'twenty four.

Speaker Change: And with that.

Speaker Change: We now put a wrap on 2023.

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

Q4 2023 EMCOR Group Inc Earnings Call

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