Q2 2024 EMCOR Group Inc Earnings Call

July 25, 2024

Danielle: Good morning. My name is Danielle, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group Second Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Danielle: After the speaker's prepared 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 1 on your telephone keypad. If you would like to withdraw your question, please press star, then 2.

Danielle: My name is Danielle, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group 2nd quarter, 2024 earnings conference call. Our lines have been placed on mute to prevent any background noise.

Danielle: After the speaker's paired 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. Keep at it. If you would like to withdraw your question, please press star, then two. Please note this call is being recorded.

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

Speaker Change: After the speaker's prepared 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 1 on your telephone keypad. If you would like to withdraw your question, please press star, then 2.

Andrew Backman: I would now like to turn the call over to Andy Backman, Vice President, MMS Relations. Mr. Backman, you may begin.

Danielle: Please note, this call is being recorded. I would now like to turn the call over to Andy Backman, Vice President of Investor Relations. Mr. Backman, you may begin.

Speaker Change: Please note this call is being recorded. I would now like to turn the call over to Andy Backman, Vice President of Investor Relations. Mr. Backman, you may begin.

Andrew Backman: Thank you, Danielle, and good morning, everyone, and welcome to EMCOR's 2nd quarter 2024 earnings conference call. For those of you joining us by webcast, we are at the beginning of our slide presentation that will accompany our remarks today. This presentation will be archived in the Investor Relations section of our website at mcoregroup.com.

Andrew G. Backman: Thank you, Danielle, and good morning, everyone, and welcome to EMCOR's second quarter 2024 earnings conference call. For those of you joining us by webcast, we are at the beginning of our slide presentation that will accompany our remarks today. This presentation will be archived in the investor relations section of our website at emcorgroup.com. With me today are Tony Guzzi, our Chairman, President, and Chief Executive Officer; Jason Nalbandian, Senior Vice President and EMCOR's Chief Financial Officer; and Maxine Mauricio, Executive Vice President, Chief Administrative Officer, and General Counsel.

Andrew G. Backman: Thank you, Danielle, and good morning, everyone, and welcome to EMCOR's second quarter 2024 Earnings Conference Call.

Speaker Change: For those of you joining us by webcast, we are at the beginning of our slide presentation that will accompany our remarks today. This presentation will be archived in the investor relations section of our website at emcorgroup.com.

Andrew Backman: With me today are Tony Guzzi, our Chairman, President and Chief Executive Officer; Jason Nalbandian, Senior Vice President and EMCOR's Chief Financial Officer; and Maxine Mauricio, Executive Vice President, Chief Administrative Officer, and General Counsel. For today's call, Tony will provide comments on our 2nd quarter. Jason will then review the 2nd quarter numbers in detail before turning it back to Tony to discuss RPOs, as well as reviewing our revised 2024 guidance before we open it up for Q&A.

Speaker Change: With me today are Tony Guzzi, our Chairman, President, and Chief Executive Officer, Jason Nalbandian, Senior Vice President and EMCOR's Chief Financial Officer, and Maxine Mauricio, Executive Vice President, Chief Administrative Officer, and General Counsel.

Andrew G. Backman: For today's call, Tony will provide comments on our second quarter. Jason will then review the second quarter numbers in detail before turning it back to Tony to discuss RPOs, as well as review our revised 2024 guidance before we open it up for Q&A. Before we begin, as a reminder, this presentation and discussion contains certain forward-looking statements and may contain certain non-GAAP financial information. Slide 2 of our presentation describes in detail these forward-looking statements and the non-GAAP financial information disclosure.

Speaker Change: For today's call, Tony will provide comments on our second quarter. Jason will then review the second quarter numbers in detail before turning it back to Tony to discuss RPOs, as well as reviewing our revised 2024 guidance before we open it up for Q&A. Thank you.

Andrew Backman: Before we begin, as a reminder, this presentation and discussion contains certain forward-looking statements and may contain certain non-GAAP financial information. Slide 2 of our presentation describes in detail these 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.

Speaker Change: Before we begin, as a reminder, this presentation and discussion contains certain forward-looking statements and may contain certain non-GAAP financial information.

Slide 2 of our presentation describes in detail these forward-looking statements and the non-GAAP financial information disclosures.

Andrew G. Backman: I encourage everyone to review both disclosures in conjunction with our discussion and accompanying slides. Finally, as a reminder, all financial information discussed during this morning's call is included in our consolidated financial statements in both our earnings press release issued this morning and in our Form 10-Q filed with the Securities and Exchange Commission.

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

Andrew Backman: Finally, as a reminder, all financial information discussed during this morning's call is included in our consolidated financial statements within both our earnings press release issued this morning and in our Form 10-Q filed with the Securities and Exchange Commission.

Speaker Change: Finally, as a reminder, all financial information discussed during this morning's call is included in our consolidated financial statements.

Tony: Within both, our earnings press release issued this morning and in our Form 10-Q filed with the Securities and Exchange Commission. And with that, let me turn the call over to Tony. Tony? Yeah. Thanks, Andy. And good morning, and thanks, everyone, for joining our call. I am going to begin my discussion on page 4.

Tony Guzzi: And with that, let me turn the call over to Tony. Tony?

Tony Guzzi: Yeah, thanks, Andy.

Tony Guzzi: And good morning, and thanks everyone for joining our call. I am. We've been by discussion on page 4. We had an exceptional first half of the year at M4, and our results for the 2nd quarter of 2024 further illustrate our continuum and an excellent execution in the field. Within the quarter, we set new quarterly records for revenues, operating income, operating margin, and diluted earnings per share. We grew revenues by 20.4% to 3.67 billion, achieved a consolidated operating margin of 9.1%, and earned $5.25 per diluted share. While revenues increased 17.7% organically, RPO's of 9 billion remained at near record levels, increasing 713 million, or 8.6% versus the year ago period.

Anthony J. Guzzi: Yeah. Thanks, Andy. And good morning, and thanks, everyone, for joining our call. I am going to begin my discussion on page 4. We had an exceptional first half of the year at EMCOR, and our results for the second quarter of 2024 further illustrate our continued momentum and excellent execution in the field. During the quarter, we set new quarterly records for revenues, operating income, operating margin, and diluted earnings per share. We grew revenues by 20.4 percent to $3.67 billion, achieved a consolidated operating margin of 9.1 percent, and earned $5.25 per diluted share.

Tony: We had an exceptional first half of the year at EMCOR and our results for the second quarter of 2024 further illustrate our continued momentum and excellent execution in the field.

Tony: Within the quarter, we set new quarterly records for revenues, operating income, operating margin, and diluted earnings per share.

Tony: We grew revenues by 20.4% to $3.67 billion, achieved a consolidated operating margin of 9.1%, and earned $5.25 per diluted share.

Anthony J. Guzzi: While revenues increased 17.7% organically, RPOs of $9 billion remained at near-record levels, increasing $713 million, or 8.6% versus the year-ago period. Our mechanical and electrical construction segments are driving our record performance. With organic revenue growth in both the quarter and year-to-day periods of over 33% in our mechanical construction segment and 18% in our electrical construction segment, we continue to be well-positioned in the right geographies and market sectors. We are reading the right mix of work.

Tony: While revenues increased 17.7% organically, RPOs of $9 billion remained at near-record levels, increasing $713 million, or 8.6% versus the year-ago period.

Tony Guzzi: Our mechanical and electrical construction segments are driving our record performance. With the organic revenue growth in both the quarter and year-to-date period of over 33% in our mechanical construction segment and 18% in our electrical construction segment, we continue to be well positioned in the right geographies and market sectors. Partners. We are reading the right mix of work, estimating our opportunities with the appropriate contingency, negotiating our contracts with care, planning with discipline, and executing our work with precision and innovation, with year-to-date operating margins of 11.8% for mechanical construction and 11.5% for electrical construction. We continue to perform well in large and growing market sectors with strong demand and anchored in favor of markets for which us includes high tech and traditional manufacturing, network and communications, which includes data centers, institutional and health care that are benefiting from long-term secular trends.

Tony: Our mechanical and electrical construction segments are driving our record performance.

Tony: With organic revenue growth in both the quarter and year-to-day periods of over 33% in our mechanical construction segment and 18% in our electrical construction segment, we continue to be well-positioned in the right geographies and market sectors.

Anthony J. Guzzi: Estimating our opportunities with the appropriate contingency. Negotiating our contracts with CARE, planning with discipline, and executing our work with precision and innovation. With year-to-date operating margins of 11.8% for mechanical construction and 11.5% for electrical construction, we continue to perform well in large and growing market sectors with strong demand anchored in favorable markets for which us include high-tech and traditional manufacturing, network, and communications, which includes data centers, institutional, and healthcare that are benefiting from long-term secular trends.

Speaker Change: We are reading the right mix of work.

Speaker Change: estimating our opportunities with the appropriate contingency, negotiating our contracts with CARE, planning with discipline, and executing our work with precision and innovation.

Speaker Change: With year-to-date operating margins of 11.8% for mechanical construction and 11.5% for electrical construction.

Speaker Change: We continue to perform well in large and growing market sectors, with strong demand anchored in favorable markets for which us includes high-tech and traditional manufacturing.

Speaker Change: Network and Communications, which includes data centers, institutional, and health care that are benefiting from long-term secular trends.

Tony Guzzi: Our teams are executing with discipline and precision, aided by the full range of virtual design and construction tools we call that VDC, and that also includes BIM, which you've heard me talk about, building information modeling, as well as excellent prefabrication, field planning, supply chain management, and contract negotiation. These teams continue to focus on delivering impressive results for our customers on incredibly sophisticated and fast-paced projects with multi-year building plans. When we target these large, sophisticated sites, we typically win 25 to 35% of the time. However, it is always important to remember, and I have said this many on many of these calls, after the initial project reward, future phases may be released in smaller increments, potentially affecting the timing and amount we recognize within our RPOs.

Anthony J. Guzzi: Our teams are executing with discipline and precision, aided by the full range of virtual design and construction tools; we call that BDC, and that also includes BIM, which you've heard me talk about, building information modeling, as well as excellent prefabrication, field planning, supply chain management, and contract negotiation. These teams continue to focus on delivering impressive results for our customers on incredibly sophisticated and fast-paced projects with multi-year building plans. When we target these large, sophisticated sites, we typically win 25 to 35 percent of the time.

Speaker Change: Our teams are executing with discipline and precision.

Speaker Change: Aided by the full range of virtual design and construction tools, we call that VDC. And that also includes BIM, which you've heard me talk about, building information modeling, as well as excellent prefabrication, field planning, supply chain management, and contract negotiation.

Speaker Change: These teams continue to focus on delivering impressive results for our customers on incredibly sophisticated and fast-paced projects with multi-year building plans.

When we target these large, sophisticated sites, we typically win 25-35% of the time.

Anthony J. Guzzi: However, it is always important to remember, and I have said this on many of these calls, after the initial project award, future phases may be released in small increments, potentially affecting the timing and amount we recognize within our RPOs, even if the cumulative revenue from these subsequent phases is equivalent to the initial award that we had previously had in RPOs. This is partially reflected in the 2% decline in RPOs from the first quarter of 2024.

Speaker Change: However, it is always important to remember, and I have said this on many of these calls, after the initial project award, future phases may be released in small increments, potentially affecting the timing and amount we recognize within our RPOs.

Tony Guzzi: Even if the cumulative revenue from these subsequent phases is equivalent to the initial award that we had previously had in RPOs, this is partially reflected in the 2% decline in RPOs from the first quarter of 2024.

Speaker Change: Even if the cumulative revenue from these subsequent phases is equivalent to the initial award that we had previously had in RPOs, this is partially reflected in the 2% decline in RPOs from the first quarter of 2024.

Anthony J. Guzzi: Beyond our construction segments, our U.S. building service segment is executing as we expect. Our mechanical services business is operating at high single-digit operating margins and is growing revenues at no double digits. We are experiencing strength in all our mechanical service lines, including repair services, service agreements, retrofit HVAC projects, and building controls, installations, and upgrades.

Tony Guzzi: Beyond our construction segments, our US building service segment is executing as we expected. Our Mechanical Services business is operating in high single-digit operating margins and is growing revenues at double digits. We are experiencing strength in all our mechanical service lines, including repair service agreements, retrofit HVAC projects, and building controls, installations, and upgrades. However, as we discussed in our year-end 2023 call on an annual basis, we have had nearly 300 million in revenue headwinds in our commercial site-based business due to the loss of certain facilities maintenance contracts on rebid, despite strong customer scores on our service delivery.

Speaker Change: Beyond our construction segments, our U.S. building service segment is executing as we expected.

Speaker Change: Our mechanical services business is operating in high single-digit operating margins.

Speaker Change: and is growing revenues at low double-digit, no double-digits. We are experiencing strength in all our mechanical service lines, including repair service.

Speaker Change: Service Agreements, Retrofit HVAC Projects,

Anthony J. Guzzi: However, as we discussed in our year-end 2023 call, on an annual basis, we have had nearly $300 million in revenue headwinds in our commercial site-based business due to the loss of certain facilities' maintenance contracts on rebid despite strong customer scores on our service delivery. Despite these headwinds, we still delivered quarterly and year-to-date operating margins of 6% and 5% in the U.S. building services segment, and revenues grew about as expected by 4.1% year-to-date. Our industrial services segment reported its best second quarter post-pandemic, and we saw improved demand for both our shop and field services on both a quarterly and year-to-date basis.

Speaker Change: and Building Controls, Installations and Upgrades.

Speaker Change: However, as we discussed

Speaker Change: In our year-end 2023 call, on an annual basis, we have had nearly $300 million in revenue headwinds in our commercial site-based business due to the loss of certain facilities maintenance contracts on rebid despite strong customer scores on our service delivery.

Speaker Change: Despite these headwinds, we still deliver quarterly and year-to-date operating margins of 6% and 5% in the U.S. building services segment, and revenues grew about as expected by 4.1% year-to-date.

Tony Guzzi: Our industrial services segment reported its best second quarter post-pandemic, and we saw improved demand for both our shop and field services on both a quarterly and year-to-date basis. Our shops continued to perform well, and the electrical business within this segment is experiencing increased demand, both from traditional upstream and midstream customers, as well as for certain renewable fuels projects. Our UK business continues to perform as expected, and it had some success in building its pipeline and retooling its business development efforts. This segment has solid operating margins at 5.4% in the quarter, and 5.3% on a year-to-date basis.

Speaker Change: Our industrial services segment reported its best second quarter post-pandemic, and we saw improved demand for both our shop and field services on both a quarterly and year-to-date basis.

Anthony J. Guzzi: Our shops continue to perform well, and the electrical business within this segment is experiencing increased demand both from traditional upstream and midstream customers, as well as for certain renewable fuels projects. Our U.K. business continues to perform as expected and has had some success in building its pipeline and retooling its business development efforts. This segment has solid operating margins of 5.4% in the quarter and 5.3% on a year-to-date basis. We had strong operating cash flow of $412 million for the year-to-date, almost double from the year-ago period.

Speaker Change: Our shops continue to perform well, and the electrical business within this segment is experiencing increased demand, both from traditional upstream and midstream customers, as well as for certain renewable fuels projects.

Speaker Change: Our UK business continues to perform as expected, and has had some success in building its pipeline and retooling its business development efforts. This segment has solid operating margins at 5.4% in the quarter and 5.3% on a year-to-date basis.

Tony Guzzi: We had strong operating cash flow of 412 million on a year-to-date basis, almost double from the year ago period. As I had said, our RPOs remain at near-record levels at 9.0 billion, and I will discuss that in more detail later, and our prospects remain strong. We successfully closed four acquisitions in the quarter for an aggregate upfront purchase price of 173 million, net of cash acquired. These acquisitions bolster our mechanical construction, building services, and our industrial service to segment.

We had strong operating cash flow of $412 million on a year-to-date basis, almost double from the year-ago period.

Anthony J. Guzzi: As I said, our RPOs remain at near record levels at $9.0 billion, and I will discuss that in more detail later, and our prospects remain strong. We successfully closed four acquisitions in the quarter for an aggregate upfront purchase price of $173 million, net of cash acquired. These acquisitions bolster our mechanical construction, building services, and our industrial services segment. With that opening, Jason, I'll turn it over to you. Thank you, Tony, and good morning, everyone.

Speaker Change: As I have said, our RPOs remain at near record levels at 9.0 billing, and I will discuss that in more detail later, and our prospects remain strong.

We successfully closed four acquisitions in the quarter for an aggregate upfront purchase price of $173 million, net of cash acquired.

These acquisitions bolster our mechanical construction, building services, and our industrial services segment. With that opening, Jason, I'll turn it over to you. Thank you, Tony, and good morning, everyone.

Jason Nalbandian: With that opening, Jason, I'll turn it over to you. Thank you, Tony, and good morning, everyone.

Jason Nalbandian: Over the next several slides, I will review the operating performance of each of our segments as well as some of the key financial data for the second quarter of 2024 as compared to the second quarter of 2023. I'm going to start on slide five with revenues. As Tony mentioned, consolidated revenues were $3.67 billion, an increase of $621.3 million for 20.4%, as demand for our services continues to be strong across the majority of the market sectors we serve. Each of our reportable segments, it's experienced year-to-year increases in revenues, and we achieved organic revenue growth of nearly 18%.

Jason R. Nalbandian: Over the next several slides, I will review the operating performance of each of our segments, as well as some of the key financial data for the second quarter of 2024, as compared to the second quarter of 2023. I'm going to start on slide five with revenue. As Tony mentioned, consolidated revenues were $3.67 billion, an increase of $621.3 million, or 20.4%, as demand for our services continues to be strong across the majority of the market sectors we serve. Additionally, each of our reportable segments experienced year-over-year increases in revenues, and we achieved organic revenue growth of nearly 18%. Looking at each of our segments, revenues in U.S. electrical construction were $800 million, an increase of 18%.

Over the next several slides, I will review the operating performance of each of our segments as well as some of the key financial data for the second quarter of 2024 as compared to the second quarter of 2023. I'm going to start on slide 5 with revenues.

As Tony mentioned, consolidated revenues were $3.67 billion, an increase of $621.3 million, or 20.4%, as demand for our services continues to be strong across the majority of the market sectors we serve.

Each of our reportable segments experienced year-over-year increases in revenues, and we achieved organic revenue growth of nearly 18%.

Jason Nalbandian: Looking at each of our segments, revenues of U.S. electrical construction were $800 million and increase of 18%. This segment continues to benefit from increased demand across many market sectors, with the most significant revenue growth once again coming from networking communications, which, as a reminder, is predominantly our data center projects. In addition, this segment experienced increases in revenues within the transportation, high-tech manufacturing, and manufacturing in industrial market sectors. Revenues for U.S. mechanical construction were $1.7 billion, increasing nearly 39%. This segment saw revenue growth across the majority of the market sectors in which we operate and benefited from greater levels of short duration projects and service work.

Looking at each of our segments, revenues of U.S. electrical construction were $800 million, an increase of 18%.

Jason R. Nalbandian: This segment continues to benefit from increased demand across many market sectors, with the most significant revenue growth once again coming from networking communications, which, as a reminder, is predominantly our data center project. In addition, this segment experienced increases in revenues within the transportation, high-tech manufacturing, and manufacturing and industrial market sectors. Revenues for U.S. mechanical construction were $1.7 billion, increasing nearly 39%.

This segment continues to benefit from increased demand across many market sectors, with the most significant revenue growth once again coming from networking communications, which as a reminder, is predominantly our data center projects.

In addition, this segment experienced increases in revenues within the transportation, high-tech manufacturing, and manufacturing and industrial market sectors.

Speaker Change: Revenues for U.S. mechanical construction were $1.7 billion, increasing nearly 39%.

Jason R. Nalbandian: This segment saw revenue growth across the majority of the market sectors in which we operate and benefited from greater levels of short-duration projects and services. The strongest growth was seen within the high-tech manufacturing market sector, largely driven by continued demand for our mechanical construction and fire protection services by customers engaged in the design, development, and production of semiconductors or electric vehicles and lithium batteries. Beyond high-tech manufacturing, we also saw notable increases in network and communications, institutional, manufacturing, and industrial, healthcare, and water and waste.

This segment saw revenue growth across the majority of the market sectors in which we operate and benefited from greater levels of short-duration projects and service work.

The strongest growth was seen within the high-tech manufacturing market sector, largely driven by continued demand for our mechanical construction and fire protection services by customers engaged in the design, development, and production of semiconductors or electric vehicles and lithium batteries.

Beyond high-tech manufacturing, we also saw notable increases within network and communications, institutional, manufacturing and industrial, healthcare, and water and wastewater.

Jason R. Nalbandian: Demand within this segment continues to be broad-based. As expected, partially offsetting the growth for both of our construction segments was a decrease in revenues from the commercial market sector due to either reduced demand across the commercial real estate industry or the completion of various warehousing and distribution products which were active a year ago. Together, our domestic construction segments generated revenues of $2.5 billion, an increase of just over 31%. Moving to U.S. Building Services

Jason Nalbandian: As expected, partially offsetting the growth for both of our construction segments was a decrease in revenues from the commercial market sector due to either reduced demand across the commercial real estate industry or the completion of various warehousing and distribution products which were active a year ago. Together, our domestic construction segments generated revenues of $2.5 billion and an increase of just over 31%. Moving to U.S. Building services, revenues were $781.1 million, representing a modest increase year over year. With revenues increasing $67.2 million or 13%, our mechanical services division within this segment continues to benefit from strong demand across its service lines, with the most significant growth coming from HVAC projects and retrofits.

Demand within this segment continues to be broad-based.

As expected, partially offsetting the growth for both of our construction segments was a decrease in revenues from the commercial market sector due to either reduced demand across the commercial real estate industry or the completion of various warehousing and distribution products which were active a year ago.

Together, our domestic construction segments generated revenues of $2.5 billion, an increase of just over 31%.

Jason R. Nalbandian: Revenues were $781.1 million, representing a modest increase year over year. With revenues increasing $67.2 million, or 13%, our Mechanical Services division within this segment continues to benefit from strong demand across its services, with the most significant growth coming from HVAC projects and retrofits. However, as anticipated and as discussed on prior calls, revenues of the segment were impacted by the non-renewal of certain contracts within our commercial and government site-based business. The loss of these facilities' maintenance contracts largely offset the growth within mechanical services.

Moving to U.S. building services, revenues were $781.1 million, representing a modest increase year-over-year.

Speaker Change: With revenues increasing $67.2 million, or 13%, our Mechanical Services division within this segment continues to benefit from strong demand across its service lines, with the most significant growth coming from HVAC projects and retrofits.

Jason Nalbandian: However, as anticipated and as discussed on prior calls, revenues of the segment were impacted by the non-renewal of certain contracts within our commercial and government site-based businesses. The loss of these facilities made in its contracts largely offset the growth within mechanical services. Looking at U.S. Industrial services, revenues were $324 million, increasing just under 11% driven by improved demand across the segments field services division, coupled with greater new build heat exchanger sales within its shop services business. And lastly, U.K. Building services delivered revenues of $106.6 million, in line with that of the prior year. period. If we turn to slide six, for the quarter, we reported operating income of $332.8 million, or 9.1% of revenues.

However, as anticipated and as discussed on prior calls, revenues of the segment were impacted by the non-renewal of certain contracts within our commercial and government site-based businesses.

The loss of these facilities' maintenance contracts largely offset the growth within mechanical services.

Jason R. Nalbandian: Looking at U.S. industrial services, revenues are $324 million, increasing just under 11%, driven by improved demand across the segment's field services division, coupled with greater new-build heat exchanger sales within its shop services business. And lastly, UK Building Services delivered revenues of $106.6 million, in line with that of the prior year.

Looking at U.S. industrial services, revenues are $324 million, increasing just under 11% driven by improved demand across the segment's field services division, coupled with greater new-build heat exchanger sales within its shop services business.

Speaker Change: And lastly, UK Building Services delivered revenues of $106.6 million in line with that of the prior year period.

Jason R. Nalbandian: For the quarter, we reported operating income of $332.8 million, or 9.1% of revenue. This compares favorably to operating income of $196.7 million, or 6.5% of revenue a year ago. Once again, a more favorable mix of work, exceptional project execution, and enhanced productivity due in part to our investments in virtual design construction and prefabrication continue to be key drivers of our improvement. Looking at our segments, U.S. Electrical Construction reported operating income of $88.6 million, which represents a nearly 75% increase, and an operating margin of 11.1%, which is a 360 basis point improvement.

Speaker Change: If we turn to slide 6.

For the quarter, we reported operating income of $332.8 million or 9.1% of revenues.

Jason Nalbandian: This compares favorably to operating income of $196.7 million, or 6.5% of revenues, a year ago. Once again, a more favorable mix of work, exceptional project execution, and enhanced productivity, due in part to our investments in virtual design construction and pre-fabrication, continue to be key drivers of our improved performance. Looking at our segments, US electrical construction reported operating income of $88.6 million, which represents a nearly 75% increase, an operating margin of 11.1%, which is a 360 basis point improvement. Increased gross profit and gross profit margin were the primary drivers of this quarter's performance. While the most notable increases were experienced within networking communications, the segment additionally benefited from greater gross profit on projects within the transportation, institutional, high-tech manufacturing, and manufacturing industrial market sectors.

This compares favorably to operating income of $196.7 million or 6.5% of revenues a year ago.

Once again, a more favorable mix of work, exceptional project execution, and enhanced productivity due in part to our investments in virtual design construction and prefabrication continue to be key drivers of our improved performance.

Looking at our segments, U.S. Electrical Construction reported operating income of $88.6 million, which represents a nearly 75% increase, and operating margin of 11.1%, which is a 360 basis point improvement.

Jason R. Nalbandian: Increased gross profit and gross profit margin were the primary drivers of this quarter's performance. While the most notable increases were experienced within network and communications, this segment additionally benefited from greater gross profit on projects within the transportation, institutional, high-tech manufacturing, and manufacturing and industrial market sectors. Operating income for U.S. mechanical construction was $213.4 million, an increase of just over 78%, and an operating margin of 12.9% expanded by 290 basis points.

Increased gross profit and gross profit margin were the primary drivers of this quarter's performance.

While the most notable increases were experienced within network and communications, this segment additionally benefited from greater gross profit on projects within the transportation, institutional, high-tech manufacturing, and manufacturing and industrial market sectors.

Jason Nalbandian: Operating income for US mechanical construction was $213.4 million, an increase of just over 78%, an operating margin of 12.9% expanded by 290 basis points. This segment experienced greater gross profit from the majority of the market sectors in which we operate, with the largest increases being generated within high-tech manufacturing, networking communications, and commercial. Together, our construction segments reported an operating margin of 12.3%. Operating income for US building services was $46.8 million, or 6% of revenues, in line with the year-ago period. Consistent with the revenue performance of this segment, increased gross profit and gross profit margin from our mechanical services division was largely offset by reductions within commercial and government side-based due to the headwinds we previously discussed.

Operating income for U.S. mechanical construction was $213.4 million, an increase of just over 78%, an operating margin of 12.9%, expanded by 290 basis points.

Jason R. Nalbandian: This segment experienced greater gross profit from the majority of the market sectors in which we operate, with the largest increases being generated within high-tech manufacturing, Network and Communications, and Commercial. Together, our construction segments reported an operating margin of 12.3%. Operating income for U.S. building services was $46.8 million, or 6% of revenues, in line with the year-ago period.

This segment experienced greater gross profit from the majority of the market sectors in which we operate, with the largest increases being generated within high-tech manufacturing, networking communications, and commercial.

Together, our construction segments reported an operating margin of 12.3%.

Operating income for U.S. building services was $46.8 million, or 6% of revenues, in line with the year-ago period.

Jason R. Nalbandian: Consistent with the revenue performance of this segment, increased gross profit and gross profit margin from our Mechanical Services Division were largely offset by reductions within commercial and government sites due to the headwinds we previously discussed. Moving to industrial services, operating income was $12.7 million or 3.9% of revenues, representing a nearly 62% increase in operating income and a 120 basis point improvement in operating margins. In addition to the impact of greater revenues, operating income of the segment benefited from higher gross profit margin, primarily within the shop services division, due to favorable pricing and greater indirect cost absorption. And lastly, UK Building Services reported an operating income of $5.8 million, or 5.4% of revenues, which is relatively consistent with the year-ago budget. Let's now turn to slide 7.

Consistent with the revenue performance of this segment, increased gross profit and gross profit margin from our Mechanical Services Division was largely offset by reductions within commercial and government site-based due to the headwinds we previously discussed.

Jason Nalbandian: Moving to industrial services, operating income was $12.7 million or 3.9% of revenues, representing a nearly 62% increase in operating income and a 120 basis point improvement in operating margin. In addition to the impact of greater revenues, operating income of the segment benefited from higher gross profit margin primarily within the shop services division due to favorable pricing and greater indirect cost absorption. Lastly, UK Building Services reported operating income of $5.8 million or 5.4% of revenues, which is relatively consistent with the year-ago period.

Moving to industrial services, operating income was $12.7 million, or 3.9% of revenues, representing a nearly 62% increase in operating income and a 120 basis point improvement in operating margin.

In addition to the impact of greater revenues, operating income of the segment benefited from higher gross profit margin, primarily within the shop services division, due to favorable pricing and greater indirect cost absorption.

And lastly, UK Building Services reported operating income of $5.8 million or 5.4% of revenues, which is relatively consistent with the year-ago period.

Jason Nalbandian: Let's now turn to slide seven. A few highlights on this slide not covered by my previous commentary, starting with gross profit. Due to the combination of the revenue growth we just discussed, as well as a 260 basis point increase in gross margin, our gross profit of $684 million has increased by nearly 40%. While our SG&A has increased year-over-year, our SG&A margin for the quarter of 9.6% remains consistent with that of the year-ago period. And finally, diluted earnings per share was $5.25 compared to $2.95 and increased of 78%. 30%.

Jason R. Nalbandian: A few highlights on this slide not covered by my previous commentary, starting with gross profit. Due to a combination of the revenue growth we just discussed, as well as a 260 basis point increase in gross margin, our gross profit of $684 million has increased by nearly 40%. While our SG&A has increased year over year, our SG&A margin for the quarter of 9.6% remains consistent with that of the year-ago period. And finally, diluted earnings per share were $5.25 compared to $2.95, an increase of $0.78.

Due to a combination of the revenue growth we just discussed, as well as a 260 basis point increase in gross margin, our gross profit of $684 million has increased by nearly 40%.

While our SG&A has increased year over year, our SG&A margin for the quarter of 9.6% remains consistent with that of the year ago period.

And finally, diluted earnings per share was $5.25 compared to $2.95, an increase of 78%.

Jason Nalbandian: Briefly turning to slide 8. This slide outlines EMCOR's performance for the first six months of 2024 and has been included here for your reference. Rather than go through our year-to-date results in detail, I wanted to simply highlight that we've had a tremendous start to the year, setting a number of new company records as we continue to deliver for our customers and shareholders. In a later slide, Tony will outline our updated earnings guidance for 2024, and I mention that now as it is this performance which frames our updated guidance. As you can see on the page, we have earned a year-to-date operating margin of 8.3%.

Jason R. Nalbandian: Turning to slide 8. This slide outlines EMCOR's performance for the first six months of 2024 and has been included here for your reference. Rather than go through our year-to-date results in detail, I wanted to simply highlight that we have had a tremendous start to the year, setting a number of new company records as we continue to deliver for our customers and shareholders. On a later slide, Tony will outline our updated earnings guidance for 2024, and I mention that now as it is this performance that frames our updated guidance.

Briefly turning to Slide 8.

This slide outlines EMCOR's performance for the first six months of 2024 and has been included here for your reference.

Rather than go through our year-to-date results in detail, I wanted to simply highlight that we have had a tremendous start to the year, setting a number of new company records as we continue to deliver for our customers and shareholders.

In a later slide, Tony will outline our updated earnings guidance for 2024, and I mention that now, as it is this performance which frames our updated guidance.

Jason R. Nalbandian: As you can see on this page, we have earned a year-to-date operating margin of 8.3%. This record margin serves as a key data point within our guidance, as the midpoint of such a range reflects a full year operating margin in line with what we have achieved today. And finally, on slide nine.

As you can see on the page, we have earned a year-to-date operating margin of 8.3 percent.

Jason Nalbandian: This record margin serves as a key data point within our guidance, as the midpoint of such range reflects a full-year operating margin in line with what we have achieved to date.

This record margin serves as a key data point within our guidance, as the midpoint of such range reflects a full year operating margin in line with what we have achieved to date.

Jason Nalbandian: And finally, on slide 9, as we've previously stated, our balance sheet remains strong and liquid and continues to be a differentiator for us in the market. Further, the size and strength of our balance sheet, coupled with our significant cash generation, leaves us well positioned to fund organic growth, pursue strategic M&A, and return capital to shareholders. In addition to the organic growth we've generated thus far, this is evidenced in part by the $173 million we have spent on acquisitions and the $149 million we have utilized for share repurchases year-to-date. Although not shown on this slide, operating cash flow for the quarter was approximately $280 million, which represents 84% of operating income, and on a year-to-date basis, we have generated $412 million of operating cash, equivalent to 70% of operating income.

Jason R. Nalbandian: As we've previously stated, our balance sheet remains strong and liquid and continues to be a differentiator for us in the market. Furthermore, the size and strength of our balance sheet, coupled with our significant cash generation, leaves us well positioned to fund organic growth, pursue strategic M&A, and return capital to shareholders. In addition to the organic growth we have generated thus far, this is evidenced in part by the $173 million we have spent on acquisitions and the $149 million we have utilized for share repurchases year to date. Although not shown on this slide, operating cash flow for the quarter was approximately $280 million, which represents 84% of operating income.

And finally, on slide nine, as we've previously stated, our balance sheet remains strong and liquid and continues to be a differentiator for us in the market.

Further, the size and strength of our balance sheet, coupled with our significant cash generation, leaves us well positioned to fund organic growth, pursue strategic M&A, and return capital to shareholders.

In addition to the organic growth we have generated thus far, this is evidenced in part by the $173 million we have spent on acquisitions and the $149 million we have utilized for share repurchases year to date.

Although not shown on this slide, operating cash flow for the quarter was approximately $280 million, which represents 84% of operating income. And on a year-to-date basis, we have generated $412 million of operating cash, equivalent to 70% of operating income.

Tony Guzzi: With that, I'll turn the call back over to Tony for a discussion on our POs.

Jason R. Nalbandian: And on a year-to-date basis, we have generated $412 million of operating cash, equivalent to 70% of operating income. With that, I'll turn the call back over to Tony for a discussion on RPS. Thanks, Jason. And I'm going to be speaking on pages 10 and 11. And I'm going to start on page 10. And on page 10, you'll see a slide I have referenced before; the format's a little different.

With that, I'll turn the call back over to Tony for a discussion on RPOs.

Tony Guzzi: Thanks, Jason, and I'm going to be speaking to pages 10 and 11, and I want to start on page 10. Now, page 10 you'll see a slide I have referenced before. The format's a little different, and it's really the same slide as you will see in our new corporate overview presentation that we launched this quarter. This slide highlights some of the key market sectors where we are seeing growth, and in many ways, this chart informs how we allocate resources to drive organic growth. And as I discuss our POs, if our review, I would take size 10 and 11, put them side by side, and you can follow the discussion with more ease.

Thanks, Jason, and I'm going to be speaking to pages 10 and 11, and I'm going to start on page 10.

Anthony J. Guzzi: And it's really the same slide, as you will see in our new corporate overview presentation that we launched this quarter. This slide highlights some of the key market sectors where we are seeing growth, and in many ways, this chart informs how we allocate resources to drive organic growth. And as I discuss RPOs, if I were you, I would take sizes 10 and 11, put them side by side, and you can follow the discussion with more ease.

And on page 10, you'll see a slide I have referenced before. The format's a little different, and it's really the same slide as you will see in our new corporate overview presentation that we launched this quarter.

This slide highlights some of the key market sectors where we are seeing growth, and in many ways this chart informs how we allocate resources to drive organic growth.

And as I discuss RPOs, if I were you, I would take Sides 10 and 11, put them side by side, and you can follow the discussion with more ease.

Anthony J. Guzzi: And in reality, as I discuss these RPOs, there's no earth-shattering news here. These are the trends we've been seeing at least over the last eight quarters, and it's how we've set the business up to succeed. So rather than review this slide in detail, because it is a continuation of what we've talked about, I'm going to discuss our RPOs as they relate to the five key trends outlined on the top of this chart.

Tony Guzzi: And then the reality, as I discuss these our POs, there's no or shattering news here. These are the trends we've been seeing at least over the last eight quarters, and it's how we've set the business up to succeed. So rather than review this slide in detail because it is a continuation of what we've talked about, I'm going to discuss our POs as they relate to the five key trends outlined on the top of this chart. So if you look at data centers and connectivity, we continue to see strong demand for hyper-scale data center work, and we report that in the network and communications market sector.

And in the reality, as I discuss these RPOs, there's no earth-shattering news here. These are the trends we've been seeing at least over the last eight quarters, and it's how we've set the business up to succeed.

So, rather than review this slide in detail, because it is a continuation of what we've talked about, I'm going to discuss our RPOs as they relate to the five key trends outlined on the top of this chart.

Anthony J. Guzzi: So if you look at data centers and connectivity, we continue to see strong demand for hyperscale data center work. And we report that in the network and communications market sector, at the end of the quarter, RPOs in the sector were a record $1.7 billion.

So if you look at data centers and connectivity, we continue to see strong demand for hyperscale data center work, and we report that in the network and communications market sector.

Tony Guzzi: At the end of the quarter, our POs in the sector were a record 1.7 billion. There are 489 million, or nearly 40% year over year, and 2% sequentially. We continue to believe that we are not only in the early earnings of the overall data center expansion, but that we have successfully positioned ourselves in the key data center geographies and we expanded our presence in these markets since 2009, 2019. Rehearing and nearsharing coupled with our work in the high tech manufacturing sector, really cuts across both the high tech manufacturing sector and the manufacturing industrial sector. In the high tech manufacturing sector, that's where we had RPOs of 1.3 billion at the end of the second quarter, and that includes semiconductors, pharma, biotech, life sciences, and the electric vehicle value chain.

At the end of the quarter, RPOs in the sector were a record $1.7 billion.

Anthony J. Guzzi: They're up $489 million, or nearly 40% year over year, and 2% sequentially. We continue to believe that we are not only in the early stages of the overall data center expansion but that we have successfully positioned ourselves in the key data center geographies. And we expanded our presence in these markets since 2009 19. Reshoring and nearshoring, coupled with our work in the high-tech manufacturing sector, really cuts across both the high-tech manufacturing sector and the manufacturing industrial sector. In the high-tech manufacturing sector, that's where we had RPOs of $1.3 billion at the end of the second quarter, and that includes semiconductors, pharma, and biotech. Life Sciences and the Electric Vehicle Value Chain

They're up $489 million, or nearly 40% year over year, and 2% sequentially.

We continue to believe that we are not only in the early endings of the overall data center expansion, but that we have successfully positioned ourselves in the key data center geographies, and we expanded our presence in these markets since 2019.

Reshoring and nearshoring, coupled with our work in the high-tech manufacturing sector, really cuts across both the high-tech manufacturing sector and the manufacturing industrial sector.

In the high-tech manufacturing sector, that's where we had RPOs of $1.3 billion at the end of the second quarter. And that includes semiconductors, pharma, biotech,

Life Sciences, and the Electric Vehicle Value Chain.

Tony Guzzi: RPOs in this sector are 58 million, or 5% from the year-ago period. And we continue to believe the long-term fundamentals are solid. As we have stated many times before, we expect ebbs and flows in certain areas of the project award and, as a result, project work within this sector, as awards will happen in different amounts and different contract structures. What should become on the site in your working on a site that has a multi-phase and multi-year building program. In addition to high tech manufacturing, we continue to have a healthy base of ours in the traditional manufacturing industrial market sector, and they total $782 million at quarter end.

Anthony J. Guzzi: RPOs in this sector were up 58 million, or 5% from the year-ago period. And we continue to believe the long-term fundamentals are solid. As we have stated many times before, we expect ebbs and flows in certain areas of project award, and, as a result, project work within this sector, as awards will happen in different amounts and different contract structures once you become on the site and you're working on a site that has a multi-phase and multi-year building program.

RPOs in this sector were up 58 million, or 5% from the year ago period.

And we continue to believe the long-term fundamentals are solid.

As we have stated many times before,

We expect ebbs and flows in certain areas of the project award, and as a result, project work within this sector.

As awards will happen in different amounts and different contract structures.

Once you become on the site and you're working on a site that has a multi-phase and multi-year building program.

Anthony J. Guzzi: In addition to high-tech manufacturing, we continue to have a healthy base of ours in the traditional manufacturing industrial market sector, and they total $782 million at quarter end. Now, you turn to energy efficiency and sustainability, and that also ties into short-duration projects, which I'll cover in a little bit. We continue to excel with retrofit project work, especially within the mechanical services division of our U.S. building services segment, where we saw a year-over-year increase in RPOs of just over 9%.

In addition to high-tech manufacturing, we continue to have a healthy base of ours in the traditional manufacturing and industrial market sector, and they total $782 million at quarter end.

Tony Guzzi: In turn to energy efficiency and sustainability, and that's also ties into short duration projects, which I'll cover in a little bit, we continue to take sale with Retrofit Project work, especially within the Mechanical Services Division of our U.S. Building Services segment, where we saw a year-over-year increase in RPOs of just over 9%. Much of this work is focused on not only retrofit of Asia equipment, but gaining efficiency with implementing a building automation upgrade coupled with gaining a significant efficiency gains with new HVAC equipment. And lastly, on this page, healthcare is an area we expect to see continued demand, with record RPOs at the end of the quarter of 1.2 billion, which is up almost 14% from the year-of-grow period.

You turn to energy efficiency and sustainability, and that also ties into short duration projects, which I'll cover in a little bit. We continue to excel with retrofit project work.

especially within the mechanical services division of our U.S. building services segment where we saw a year-over-year increase in RPOs of just over 9%.

Anthony J. Guzzi: Much of this work is focused on not only retrofitting aged equipment but gaining efficiency with implementing a building automation upgrade, coupled with gaining significant efficiency gains with new HVAC equipment. And lastly on this page, healthcare is an area we expect to see continued demand for with record RPOs at the end of the quarter of $1.2 billion, which is up almost 14% from the year-ago period. Water and Wastewater, which now totals $602 million, is up 24% year-over-year.

Much of this work is focused on not only retrofit of aged equipment, but gaining efficiency with implementing a building automation upgrade coupled with gaining significant efficiency gains with new HVAC equipment.

And lastly on this page, healthcare is an area we expect to see continued demand, with record RPOs at the end of the quarter of $1.2 billion, which is up almost 14% from the year-ago period.

Tony Guzzi: Water and wastewater, which analysis total $602 million, is up 24% year-over-year. The award of these projects is typically episodic in nature due to the size and scope of the work, and most of our work is predominantly performed in Florida. The institutional sector, which was just over 1.1 billion, up nearly 36% year-of-year, and that includes work for schools, universities, and local, state, and federal office builders. And what are they spending on? They're spending on research facilities, enhanced and new classroom space, technology upgrades that spread across the campus, and renovation and retrofits for improved air quality, and a lot of projects to reduce energy consumption.

Water and Wastewater, which now totals $602 million, is up 24% year-over-year. The award of these projects is typically episodic in nature due to the size and scope of the work, and most of our work is predominantly performed in Florida.

Anthony J. Guzzi: The award of these projects is typically episodic in nature due to the size and scope of the work, and most of our work is predominantly performed in Florida. The institutional sector, which was just over $1.1 billion, up nearly 36% year-over-year, includes work for schools, universities, and local, state, and federal office buildings. And what are they spending it on? They're spending it on research facilities, enhanced and new classroom space, technology upgrades that spread across the campus, and renovation or retrofits for improved air quality and a lot of projects to reduce energy consumption. And that's the types of projects that are driving demand in this market sector. Transportation grew about 39% for us, up to $276 million. And its infrastructure is largely focused around airports.

The institutional sector, which was just over $1.1 billion, up nearly 36% year-over-year, and that includes work for schools, universities, and local, state, and federal office buildings. And what are they spending on?

They're spending on research facilities, enhanced and new classroom space, technology upgrades that spread across the campus.

and renovation and retrofits for improved air quality and a lot of projects to reduce energy consumption. And that's the types of projects that are driving demand in this market sector.

Tony Guzzi: And that's the Prypes of Projects that are driving demand in this market sector. Transportation, it grew about 39% for us, up 276 million. And its infrastructure awards largely focused around airports, and in short duration projects, again, go back to my energy efficiency comments; they're very much the same. These are electrical upgrades, HVAC upgrades, technology upgrades, where you bring more Wi-Fi in and enhancements, building controls upgrades to make the building more efficient, smarter, cleaner, and productive. And partially offsetting these increases, we experienced an RPO decrease within commercial. RPOs in its sector now total 1.3 billion. And as a reminder, our exposure in this sector is weighted less towards new construction, high rise, and office projects, the more towards distribution type project work and tenant fit-up projects.

Anthony J. Guzzi: And then short-duration projects, again, go back to my energy efficiency comments. They're very much the same. These are electrical upgrades, HVAC upgrades, technology upgrades, where you bring more Wi-Fi in and enhancements, and building controls upgrades to make the building more efficient, smarter, cleaner, and productive. And partially offsetting these increases, we experienced an RPO decrease within commercial. RPOs in this sector now total $1.3 billion, and as a reminder, our exposure in this sector is weighted less towards new construction high-rise and office projects but more towards distribution-type project work and tenant fit-out projects. To conclude my RPO commentary, and as I said earlier, total company RPOs at the end of the second quarter were approximately $9 billion, up $713 million, or 8.6% year-over-year.

and its infrastructure awards, largely focused around airports.

These are electrical upgrades, HVAC upgrades.

technology upgrades where you bring more Wi-Fi in and enhancements, building controls upgrades to make the building more efficient, smarter, cleaner, and productive.

And partially offsetting these increases, we experienced an RPO decrease within commercial.

RPOs in this sector now total $1.3 billion, and as a reminder, our exposure in this sector is weighted less towards new construction high-rise and office projects, but more towards distribution-type project work and tenant fit-out projects.

Tony Guzzi: To conclude my RPO commentary, and as I said earlier, total company RPOs at the end of the second quarter will approximately 9 billion of 713 million, or 8.6% year-over-year. We are pleased with our performance in our PO, we're pleased with the mix in our RPOs, especially considering the strong revenue growth we've had in the second quarter, which we'd like to very strong demand for our services. And what you're most worried about, our pipeline remains robust.

To conclude my RPO commentary, and as I said earlier, total company RPOs at the end of the second quarter were approximately $9 billion, up $713 million, or 8.6% year-over-year.

Anthony J. Guzzi: We are pleased with our performance in RPO. We're pleased with the mix in RPOs, especially considering the strong revenue growth we've had in the second quarter, which reflects a very strong demand for our services. And what you're most worried about, our pipeline remains robust. So now we go to page 12, and I'm going to conclude.

We are pleased with our performance in RPO. We're pleased with the mix in RPOs, especially considering the strong revenue growth we've had in the second quarter, which reflects a very strong demand for our services. And what you're most worried about, our pipeline remains robust.

Tony Guzzi: So now we'll go to page 12, and I'm going to conclude. With the strong first half performance we had, we are going to raise guidance. We're going to raise our revenue guidance to 14.5 to 15 billion, and we're going to increase our earnings per diluted share guidance from 1550 to 1650 to 19 to 20 dollars. We are seeing incredible execution in the field, and the operating margins in our construction segments are more resilient and higher than we have experienced in the past or expected at the beginning of the year. We expect these trends to continue with respect to our success in bidding, winning, and executing work in favorable market sectors that I've outlined, such as networking communications to include data centers, high-tech manufacturing, energy efficiency work, healthcare, and traditional manufacturing and industrial.

Anthony J. Guzzi: With the strong first half performance we had, we are going to raise guidance. We're going to raise our revenue guidance to $14.5 to $15 billion, and we're going to increase our earnings per diluted share guidance from $15.50 to $16.50 to $19 to $20. We are seeing incredible execution in the field, and the operating margins in our construction segments are more resilient and higher than we have experienced in the past or expected at the beginning of the year.

So now we'll go to page 12, and I'm going to conclude.

We are seeing incredible execution in the field and the operating margins in our construction segments are more resilient and Higher than we have experienced in the past or expected at the beginning of the year

Anthony J. Guzzi: We expect these trends to continue with respect to our success in bidding, winning, and executing work in favorable market sectors that I've outlined, such as networking and communications to include data centers, high-tech manufacturing, energy-efficiency work, healthcare, and traditional manufacturing and industrial. Further, we expect our U.S. and U.K. building services segments to continue to perform as outlined in previous calls, and we expect the industrial services segment to perform at its highest

We expect these trends to continue with respect to our success in bidding, winning, and executing work in favorable market sectors that I've outlined, such as networking and communications, to include data centers, high-tech manufacturing, energy efficiency work, health care, and traditional manufacturing and industrial.

Tony Guzzi: Further, we expect our U.S. and UK building services segments continue to perform as outlined in previous calls, and we expect the industrial services segment to perform at its highest level post-pandemic. We will continue to face challenges in markets, especially in our site-based services business in the U.S. and UK. Macrofactor centers higher interest rates, a presidential election which may slow decision-making, supply chain and energy prices eruptions, and global conflicts will continue to pose challenges for us. But, as we have done in the past, we will continuously plan and execute as best we can to overcome these challenges.

Further, we expect our U.S. and U.K. building services segments continue to perform as outlined in previous calls, and we expect the industrial services segment to perform at its highest level post-pandemic.

Anthony J. Guzzi: We will continue to face challenges in the markets, especially in our site-based services business in the U.S. and U.K. Macro factors such as higher interest rates, a presidential election which may slow decision making, supply chain and energy price disruptions, and global conflicts will continue to pose challenges for us. But, as we have done in the past, we will continue to plan and execute as best we can to overcome these challenges. Also, we remain diligent in how we serve our commercial real estate and private equity customers, as high interest rates and a scarcity of capital can impact their businesses.

We will continue to face challenges on markets, especially in our site-based services business in the US and UK.

Macro factors such as higher interest rates, a presidential election which may slow decision-making, supply chain and energy price disruptions, and global conflicts will continue to pose challenges for us.

But as we have done in the past, we will continue to plan and execute as best we can to overcome these challenges. Also, we remain diligent in how we serve our commercial real estate and private equity customers as high interest rates and scarcity of capital can impact their businesses.

Tony Guzzi: Also, we remain diligent in how we serve our commercial real estate and private equity customers, as high interest rates and scarcity of capital can impact their businesses.

Anthony J. Guzzi: Finally, as I always do, I want to thank all of our EMCOR leaders and teammates for their hard work and dedication to serving our customers in a safe and productive way. You know, we have a very talented team here at EMCOR, guided by our EMCOR values of mission first, people always, and we'll continue to be focused on executing our mission for our customers and shareholders while keeping EMCOR a great place to work for our employees. With that, Danielle, I will ask you some questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.

Tony Guzzi: Finally, as I always do, I want to thank all of our M.Core leaders and teammates for their hard work and dedication to serving our customers in a safe and productive way. We have a very talented team here at M.Core, guided by our M.Core values of mission-first, people always, and we'll continue to be focused on executing our mission for our customers and shareholders while keeping M.Core a great place to work for our employees.

Finally, as I always do, I want to thank all of our EMCOR leaders and teammates for their hard work and dedication to serving our customers in a safe and productive way.

You know, we have a very talented team here at EMCOR, guided by our EMCOR values of mission first people always, and we'll continue to be focused on executing our mission for our customers and shareholders, while keeping EMCOR a great place to work for our employees. With that, Danielle, I will take questions.

Danielle: With that, Danielle, I will take questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-ton phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.

Danielle: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. The first question comes from Brent Thielman from D.A. Davidson. Please go ahead. Hey, thanks. Good morning.

If you are 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 your question, please press star then 2.

Brent Thielman: The first question comes from Brent Filman from DA Davidson. Please go ahead.

Brent Edward Thielman: Congratulations on a huge quarter here. Thanks, Brent. Tony, Tony, maybe just to start, could you talk about the pipeline of potential opportunities you're still seeing in high tech and sort of manufacturing and industrial. I think just looking for any other evidence. This sequential reduction, RPOs, is more likely temporary and timing-related, as I think you're ultimately suggesting.

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

Brent Thielman: Hey, thanks.

Brent Thielman: Good morning. Congrats on a huge quarter here.

Tony Guzzi: Thanks, Brent.

Hey, thanks. Good morning. Congrats on a huge quarter here. Thanks, Brent. Tony, Tony, maybe just to start, could

Tony Guzzi: Tony, maybe just a start. Could you talk about maybe the pike line of potential opportunities you're still seeing in high-tech and sort of manufacturing and industrial? I think just looking for any other evidence. This sequential reduction RPOs is more likely temporary and timing related as I think you're you're ultimately suggesting here. Yeah, I mean look if you think big picture, right? These are sites that are going to be developed over 10 to 15 years. And so nothing's changed, right? Because of AI and all that remains true today, just like it did last quarter, the quarter before that, the quarter before that, and the quarter before that.

Can you talk about maybe the pipeline of potential opportunities you're still seeing in high-tech?

and sort of manufacturing and industrial. I think just looking for any other evidence, this sequential reduction in RPOs is more likely temporary and timing-related, as I think you're ultimately suggesting here.

Anthony J. Guzzi: Yeah, I mean, look, if you think big picture, right, these are sites that are going to be developed over 10 to 15 years. And so nothing's changed, right? The fabs are moving from Taiwan back to the US. So there's nearshoring.

Yeah, I mean, look, if you think big picture, right, these are sites that are going to be developed over 10 to 15 years.

And so nothing's changed, right?

The FABs are moving from Taiwan back to the U.S., so there's near-shoring.

Anthony J. Guzzi: There is an expanded need for chips because of AI. And all that remains true today, just like it did last quarter, the quarter before that, the quarter before that, and the quarter before that. Uh, we executed at a fairly high burn rate on one of those sites as we hit peak manpower and we hit peak scope, right? We're at the sweet spot on one of the major sites, and that's a good thing. You can see that in our cash flow, and you can see that in the execution and the drop through in our mechanical business, especially when you get focused on high tech.

There's expanded need for chips because of AI, and all that remains true today, just like it did last quarter, the quarter before that, the quarter before that, and the quarter before that.

Tony Guzzi: We executed at a fairly high brain burn rate on one of those sites; we hit peak manpower and we hit peak scope, right? We read the sweet spot on one of the major sites. And that's a good thing. You can see that in our cash flow, and you can see that in the execution, and the drops are in our mechanical business, especially when you get focused on high tech. So if you go to the semiconductor sector, we're bullish on the sites. We're on. We have good line of sight to multi your projects. But like I said before, sometimes the multi your projects now come in different chunks.

We executed at a fairly high burn rate on one of those sites as we hit peak manpower, and we hit peak scope, where we were at the sweet spot on one of the major sites.

And that's a good thing. You can see that in our cash flow, and you can see that in the execution and the drop-through in our mechanical business especially, when you get focused on high-tech.

Anthony J. Guzzi: So if you go to the semiconductor sector, we're bullish on the sites we're on. We have a good line of sight to multi-year projects. But, like I've said before, sometimes the multi-year projects now come in different chunks. We're there now.

So, if you go to the semiconductor sector, we're bullish on the sites we're on. We have a good line of sight to multi-year projects.

Tony Guzzi: We're there now. We're working. We're part of the team. You know, we're developing the site. And then sometimes they'll come in in a different contracting form, or they will come back in lump sum. Our job is to make sure we stay as part of that team, execute well, finish the work well, get a commission well, and move to the next phase. And most of these sites, the three or four big ones were on, have three or four more fabs. They're going to build. And you know, it's not like they jump from one to the other and everything happens literally.

But, like I've said before, sometimes the multi-year projects now come in different chunks. We're there now.

Anthony J. Guzzi: We're working, we're part of the team, you know, we're developing the site, and then sometimes they'll come in under a different contracting form, or they will come back in a lump sum. Our job is to make sure we stay as part of that team, execute well, finish the work well, get it commissioned well, and move to the next phase. Most of these sites, the three or four big ones we're on, have three or four more fabs they're going to build. And, you know, it's just not like they jump from one to the other, and everything happens literally.

We're working, we're part of the team, you know, we're developing the site.

And then sometimes they'll come in in a different contracting form or they will come back in lump sum.

Our job is to make sure we stay as part of that team.

Execute well, finish the work well, get it commissioned well, and move to the next phase. Most of these sites, the three or four big ones we're on, have three or four more fabs they're going to build. And, you know, it's just not like they jump from one to the other and everything happens literally.

Tony Guzzi: So we feel really good about semiconductors, and nothing's changed on our outlook on pharma and bio farm either. They're a lot going on. We're in the right places, especially in Research Triangle Park in Indiana and in New Jersey. And these are long-term building programs. Again, where you will hit a revenue run rate where we're at now, which is hard to keep up with the RPOs. And then again, go back to the contracting mechanism. And reassuring and reassuring, we show you really no change. As far as EVs, I've said this before; we were actually very careful of how we did this.

Anthony J. Guzzi: So we feel really good about semiconductors, and nothing's changed in our outlook on pharma and bio pharma either. There's a lot going on. We're in the right places, especially in Research Triangle Park in Indiana and in New Jersey. And these are long-term building programs, again, where you will hit a revenue run rate where we're at now, which is hard to keep up with the RPOs. And then again, go back to the contracting mechanism. And in reassuring and nearshoring, we see really no change.

So we feel really good about semiconductors, and nothing's changed on our outlook on pharma and bio-pharma either.

There's a lot going on. We're in the right places, especially in Research Triangle Park, in Indiana, and in New Jersey. And these are long-term building programs, again, where you will hit a revenue run rate where we're at now, which is hard to keep up with the RPOs, and then, again, go back to the contracting mechanism.

Anthony J. Guzzi: As far as EVs, I've said this before, we were actually very careful of how we did this. We really led with fire and life safety. The structures are getting built.

And in reassuring and nearshoring, we see really no change.

As far as EVs, I've said this before, we were actually very careful about how we did this. We really led with fire and life safety. The structures are getting built, they're going to continue to get built as they build out of sight. The next phase will be equipment and placement. That has slowed down.

Tony Guzzi: We really led with fire life safety. The structures are getting built. They're going to continue to get built as they build on site. The next phase will be equipment and placement. That has slowed down. That was never the biggest part of what we were doing. It was a big part of what we did, like Jason said in the second quarter. But it was never the biggest part of what our high-tech manufacturing exposure has been. And look, I have a personal view. It doesn't really matter whether it's 12 percent, 15 percent, or 20 percent, or 30 percent.

Anthony J. Guzzi: They're going to continue to get built as they build out of sight. The next phase will be equipment and placement. That has slowed down; that was never the biggest part of what we were doing. It was a big part of what we did, like Jason said, in the second quarter, but it was never the biggest part of what our high-tech manufacturing exposure has been. And look, I have a personal view.

That was never the biggest part of what we were doing. It was a big part of what we did, like Jason said, in the second quarter. But it was never the biggest part of what our high-tech manufacturing exposure has been.

Anthony J. Guzzi: It doesn't really matter whether it's 12%, 15%, or 20%, or 30%. It's going to be somewhere in there, VV penetration, uh... and then more things will be built, there'll be consolidation in that space, and we'll be very careful. We've always been careful how we serve the automotive sector because it is a very episodic type business and, quite frankly, they're a very difficult customers, And then finally, as you go to other nearshoring, we continue to see that as a long-term trend. That trend was happening before COVID. COVID accelerated it.

And look, I have a personal view. It doesn't really matter whether it's 12%, 15%, or 20%, or 30%. It's going to be somewhere in there, VV penetration.

Tony Guzzi: It's going to be somewhere in their EV penetration. And then more things will be built. They'll be consolidation in that space. And we'll be very careful. We've always been careful how we serve the automotive sector because it is a very episodic type business. And quite frankly, they're a very difficult customer, and you have to be careful.

Then more things will be built, there'll be consolidation in that space, and we'll be very careful. We've always been careful how we serve the automotive sector, because it is a very episodic type business, and quite frankly, they're a very difficult customer, and you have to be careful.

Tony Guzzi: And then finally, as you go to other near shoring, we continue to see that as a long-term trend. That trend was happening before COVID. COVID accelerated it. And it continues to be as people look to reassure and expand their supply chains. So that's a long-winded answer to what we're seeing there. But we still are very bullish yet. On what's happening in high tech manufacturing and manufacturing industry. That's helpful, too. I appreciate that.

Anthony J. Guzzi: And it continues to be as people look to reshore and expand their supply chains. So that's a long winded answer to what we're seeing there. But we still are very bullish on what's happening in high-tech manufacturing and manufacturing. That's, that's helpful. I appreciate that.

Bye.

And then finally, as you go to other nearshoring, we continue to see that as a long-term trend. That trend was happening before COVID.

COVID accelerated it, and it continues to be as people look to reshore and expand their supply chains. So that's a long-winded answer to what we're seeing there, but we still are very bullish yet on what's happening in high-tech manufacturing and the manufacturing industry.

Brent Edward Thielman: And then just in terms of the profitability of the company, overall, I mean, continue to attain new highs. And Tony, you can sort of compare and contrast what the bid margin is, what customers are willing to pay to bring you in versus just, you know, simple, effective execution in the field be helpful. Those things are really hard to separate because on these bigger projects, which is really what's driving our margins.

Tony Guzzi: And then just in terms of the profitability of the company overall, I mean, continue to attain new highs and Tony, just you could sort of compare and contrast what what is bid margins, what customers are willing to pay to bring you in versus just, you know, simple, you know, effective execution and the field to be helpful to get your cover there. That those things are really hard to separate because, on these bigger projects, which is really what's driving our margins, most times we are working in a collaborative way with the customer to be able to fit inside their budget and come up with solutions that work with their budget.

That's helpful, Tony. I appreciate that. And then just in terms of the profitability of the company overall, I mean, continue to attain new highs and Tony just...

You can sort of compare and contrast what...

What is bid margins, what customers are willing to pay to bring you in versus just, you know, simple

Yeah, effective execution in the field, it'd be helpful to get your cover there. Those things are really hard to separate, because on these bigger projects, which is really what's driving our margins,

Brent Edward Thielman: Most of the time, we are working in a collaborative way with the customer to be able to fit inside their budget and come up with solutions that work with their budget. So it gets really hard to talk about pricing.

Most times, we are working in a collaborative way with the customer to be able to fit inside their budget and come up with solutions that work with their budget.

Tony Guzzi: So it gets really hard to talk about pricing. I think, you know, productivity and our ability to do virtual design and construct and enter earlier in the design phase and do it, and we're not design builders necessarily, but upstream to do engineering assist, which will then compress the time and get the drawings right to begin with. And then to be able to develop a good model that we can all work from and build with and not run into the collisions and things you do on a worksite, and then take that bin plan and drive it to a very thoughtful prefabrication and supply chain management plan and work with our suppliers.

Anthony J. Guzzi: I think, you know, productivity and our ability to do virtual design and construct and enter earlier in the design phase and do it; we're not design builders necessarily, but upstream to do engineering assist, which will then compress the time and get the drawings right to begin with, and then to be able to develop a good model that we can all work from and build and not run into the collisions and things you do on a work site. And then take that BIM plan and drive it to a very thoughtful prefabrication and supply chain management plan by working with our suppliers. I think, you know, my gut.

So it gets really hard to talk about pricing. I think

You know, productivity and our ability to do virtual design and construct and enter earlier in the design phase and do it. And we're not, we're not design builders necessarily, but upstream to do engineering assist.

which will then compress the time and get the drawings right to begin with.

and then to be able to develop a good model that we can all work from.

and build and not run into the collisions and things you do on a worksite. And then take that BIM plan and drive it to a very thoughtful prefabrication and supply chain management plan and work with our suppliers. I think you know, I my gut

Tony Guzzi: I think, you know, I got three quarters of this is coming from productivity and means and methods and planning, and a quarter of it's coming from price or less because there's too much work going on on productivity. And it's or two linked with these customers on the bills to think it could be price, and let's be clear. Nothing's changed in this business as far as anything we do is, there's competition and these are large sophisticated customers that know how to drive competition to a site.

Anthony J. Guzzi: Three-quarters of this is coming from productivity and means and methods and planning, and a quarter of it's coming from price or less because there's too much work going on in productivity, and it's too linked with these customers on the bill to think it could be price. And let's be clear, nothing's changed in this business as far as anything we do, there's competition, and these are large, sophisticated customers that know how to drive competition to a site. Yep.

Three-quarters of this is coming from productivity and means and methods and planning and a quarter of it's coming from price or less Because there's too much work going on in productivity

And it's too linked with these customers on the bill to think it could be priced. And let's be clear.

Nothing's changed in this business as far as, in anything we do, there's competition. And these are large, sophisticated customers that know how to drive competition to a site.

Brent Edward Thielman: Tony, I guess my last question, really kind of just with respect to the, you know, considering the outlook for the rest of 2024, I mean, this is just, Master of the Year. I know you have the second half to work through just from an earnings perspective, and I'd appreciate your perspectives on how you think the company can build off of that, sort of, incredible year provided by, kind of, end market drivers, sustained. I mean, I always think about things, right? I think, you know, in general, we're very cautious and conservative, right? By nature,

Tony Guzzi: Yeah, Tony, I guess my last question really kind of just with respect to the, you know, considering the outlook for rest of 2024, and this is just a massive year and, you know, potential accomplishment. I know you have a second out to work through just from an earnings perspective, and I appreciate your perspective on how you think the company can build off of this sort of incredible year provided these kind of in market drivers. Yeah, I mean, I always think about things right. I think you know, in general, very cautious and conservative, right. By nature, and I think that's why we've had this long-term record of success in what is a pretty difficult business.

Yep. Tony, I guess my last question, really kind of just with respect to the, you know, considering the outlook for rest of 2024. I mean, this is just a massive year.

a potential accomplishment, and there you have a second half to work through just from an earnings perspective. And I'd appreciate your perspectives on how you think the company can build off of this

sort of incredible year provided these.

kind of end market drivers for staying in the subsequent years? I mean, I always think about things, right? I think, you know, in general, we're very cautious and conservative, right? By nature. And I think that's why we've had this long term record of success in what is a pretty difficult business.

Anthony J. Guzzi: And I think that's why we've had this long-term record of success in what is a pretty difficult business. I think about things maybe a little differently, right, in the sense that you've got to put the enablers in place to allow growth, and you've got to be positioned with the right customers in the right place. And so the question is, are you continuing to expand the geography you conserve and the sites you conserve? Have you opened up the types of things you can do?

Tony Guzzi: I think about things, maybe a little differently, right, in sense of you got to put the enablers in pace to allow growth. And you got to position with the right customers in the right place. And so the question is, are you continuing to expand the geography you can serve and the sites you can serve. Have you opened up the types of things you can do? An example of that is we continue to look for opportunities to expand the geographies brand or acquisition program in the first part of this year and really over the last number of years.

I think about things maybe a little differently, right, in the sense of you've got to put the enablers in place to allow growth, and you've got to be positioned with the right customers in the right place.

And so the question is, are you continuing to expand the geography you conserve?

and the sites you can serve. Have you opened up the types of things you can do? An example of that is we continue to look for opportunities to expand the geographies we're in. Our acquisition program in the first part of this year, and really over the last number of years, forever has been a focus on that.

Anthony J. Guzzi: An example of that is we continue to look for opportunities to expand the geographies we're in. Our acquisition program in the first part of this year and really over the last number of years, forever, has been a focus on that. But then you have to think about, okay, I built a capability to do this kind of project in this geography with this subsidiary. But are there other people that have the capability to do that?

Tony Guzzi: But forever has been a focus on that. But then you're going to think about, okay, I've built a capability to do this kind of project in this geography with this subsidiary. Are there other people that have the capability to do that? They do projects that are similar and that it's coming to their geography. Can we do a lot of peer learning? Can we have people teach them how to do the project planning upfront? Can they come and unlearn the means and methods? So, you know, I don't know what end demand will ever be, right. We try to position ourselves to markets we think are growing.

But then you've got to think about, okay, I built a capability to do this kind of project.

In this geography with this subsidiary, are there other people that have the capability to do that? They do projects that are similar and that is coming to their geography. Can we do a lot of peer learning? Can we have people teach them how to do the project planning up front? Can they come and learn the means and methods?

Anthony J. Guzzi: They do projects that are similar, and that relates to their geography. Can we do a lot of peer learning? Can we have people teach them how to do project planning up front? Can they come and learn the means and methods?

Anthony J. Guzzi: So I don't know what the end demand will ever be, right? We try to position ourselves in markets we think are growing. But I do know if you continue to build capability within your workforce, you continue to build capability in the number of markets you can serve, and if you continue to train your leaders the right way, and how you treat people, and how you lead, and how you plan, and you do those things right, then in the long term, you can build on success.

So, you know, I don't know what end demand will ever be, right? We try to position ourselves to markets we think are growing.

Tony Guzzi: But I do know if you continue to build capability within your workforce. You continue to build capability in the number of markets you can serve. And if you continue to train your leaders the right way and how you treat people and how you lead and how you plan, and you do those things right, then long term you can build on success. And I think that's the playbook we've been following for a while. I think we're in a period now that obviously it's accelerated over these past three years. But I think a lot of that is investments that we made five, ten years ago to continue to build that workforce and build the culture that we have that allows for transparency, that allows for teamwork, that allows for respect and share ideas across our company.

But I do know if you continue to build capability within your workforce.

You continue to build capability in a number of markets you can serve. And if you continue to train your leaders the right way, and how you treat people, and how you lead, and how you plan, and you do those things right, then long term you can build on success.

Anthony J. Guzzi: And I think that's the playbook we've been following for a while. I think we're in a period now that, obviously, it's accelerated over these past three years, but I think a lot of that is investments that we made five, ten years ago to continue to build that workforce and build the culture that we have that allows for transparency, that allows for teamwork, that allows for respect and sharing ideas across our company.

And I think that's the playbook we've been following for a while.

I think we're in a period now that obviously it's accelerated over these past three years.

But I think a lot of that is investments that we made, you know, five, ten years ago to continue to build that workforce and build the culture that we have that allows for transparency, that allows for teamwork, that allows for respect and share ideas across our company.

Anthony J. Guzzi: And then you couple that with a strong focus on discipline and disciplined execution, and then you always keep the safety of your workforce and your planning at paramount. I think you get good results, and you position yourself well with key customers; you can grow with them as they expand what they're doing. Thanks, Tony. I'll get back. The next question comes from Adam Thalhimer from Thompson and Davis. Please go ahead.

Tony Guzzi: And then you couple that with a strong focus on discipline and discipline execution. And then you always keep safety of your workforce and your planning paramount. I think you get good results, and you position yourself well with key customers. You can grow with them as they expand what they're doing.

and then you couple that with a strong focus on discipline and discipline execution and then you always keep safety of your workforce in your planning and paramount. I think you get good results and you position yourself well with key customers. You can grow with them as they expand what they're doing.

Brent Thielman: Okay, thanks, Tony.

Brent Thielman: I'll get back in here.

Adam Thalhimer: The next question comes from Adam Thalhimer from Thompson and Davis.

Okay. Thanks, Tony. I'll get back in queue.

The next question comes from Adam Thalhimer from Thompson and Davis. Please go ahead.

Adam Thalhimer: Please go ahead. Hey, good morning, guys. Also for drafts on a great quarter.

Adam Robert Thalhimer: Hey, good morning guys. Also, congrats on a great quarter. Tony, is the headwind you talked about within commercial, is that coming in any different than you anticipated? No, I think we'd say, maybe you can elaborate on this and put some context on it. It's exactly where we thought it would be. And quite frankly, we might have had this decline even if the commercial worker was strong because we would have pivoted our resources to some of the high-tech manufacturing and traditional manufacturing anyway because it's longer-term, larger projects, more difficult projects, which are right in our wheelhouse, especially on the fire and life safety side.

Hey, good morning guys. Also, congrats on a great quarter.

Tony Guzzi: Tony, is the headwind you talked about within commercial? Is that coming in any different than you anticipated? No, I think I think we'd say in this maybe you can elaborate on this and put some context on it's exactly where we thought it would be. And quite frankly, we might have had this decline, even if the commercial worker was strong, because we would have pivoted our resources to some of the high tech manufacturing and traditional manufacturing anyway, because it's longer term, larger projects, more difficult projects, which is right in our wheelhouse, especially on the fire like safety side.

Tony, is the headwind you talked about within commercial, is that coming in any different than you anticipated? No, I think we'd say, and Jason maybe you can elaborate on this and put some context on it, it's exactly where we thought it would be.

And quite frankly, we might have had this decline even if the commercial worker was strong because we would have pivoted our resources to some of the high-tech manufacturing and traditional manufacturing anyway, because it's...

Longer term, larger projects, more difficult projects, which is right in our wheelhouse, especially on the fire and life safety side.

Tony Guzzi: So we would have actually not the way of a shortage of workforce, but we would have pivoted some of that workforce to a more lucrative market anyway.

Adam Robert Thalhimer: So we would have – not that we have a shortage of workforce, but we would have pivoted some of that workforce to a more lucrative market anyway. Jason, you got – Tony, I would agree with that.

So we would have, not that we have a shortage of workforce, but we would have pivoted some of that workforce.

Jason Nalbandian: Jason, you got Tony; I would agree with that. I think I think right on the commercial side, it is the only market sector where, on a quarter day basis, we are down on the construction side. It's exactly what we expected, both electrically and mechanically, and as Tony said before, we pivoted ourselves elsewhere where we are seeing growth. And then on commercial, if the question is specific to commercial site base, where we've talked about the headwinds there, it's exactly the contracts that we spoke about at the end of December. The revenue decline there is exactly what we anticipated, and building services is operating collectively as a segment right where we thought it would be, right?

Anthony J. Guzzi: I think on the commercial side, it is the only market sector where, on a quarter-day basis, we are down on the construction side. It's exactly what we expected, both electrically and mechanically, and as Tony said before, we've pivoted ourselves elsewhere where we are seeing growth. And then on commercial, if the question is specific to commercial site-based, where we've talked about the headwinds there, it's exactly the contracts that we spoke about at the end of December.

to a more lucrative market anyway. Jason, you got it? Tony, I would agree with that. I think

I think right on the commercial side.

It is the only market sector where, on a quarter-day basis, we are down on the construction side. It's exactly what we expected, both electrically and mechanically, and, as Tony said before, we've pivoted ourselves elsewhere where we are seeing growth. And then, on commercial, if the question is specific to commercial site-based, where we've talked about the headwinds there, it's exactly the contracts that we spoke about at the end of December . The revenue decline there is exactly what we anticipated, and building services is operating collectively as a segment right where we thought it would be.

Anthony J. Guzzi: The revenue decline there is exactly what we anticipated, and building services is operating collectively as a segment right where we thought it would be, right? The growth in the quarter being 1 percent and on a year-to-date basis at 4 percent. And then presumably, you know, you're running pretty flat out.

Jason Nalbandian: The growth in the quarter being 1% and on a year day basis at 4%.

The growth in the quarter being 1% and on a year-to-date basis at 4%.

Tony Guzzi: And then, presumably, you know, you're running pretty flat out. I assume your guys are fully engaged. You're probably having some labor availability issues if anything. I mean, if you guys have been turning away work, or how have you been managing backlog?

Okay. And then presumably, you know, you're running pretty flat out. I assume your guys are fully engaged. You're probably having some labor availability issues, if anything. I mean, have you guys been...

Adam Robert Thalhimer: I assume your guys are fully engaged. You're probably having some labor availability issues, if anything. I mean, have you guys been turning away work, or how have you been managing backlogs? We, you know, look, let's think about business in general, right? These are massive markets, even when times aren't as bullish as they are now. When you run a company like ours, and you run it at the subsidiary level, you're always focused on, "What are the best opportunities in the market I have for the capabilities I have, and how am I going to deploy those resources?" And you do it in two different ways, right?

Tony Guzzi: Look, let's think about business in general. These are massive markets, even when times aren't as bullish as they are now. When you run a company like ours, and you're running it at the subsidiary level, you're always focused on which the best opportunities in the market I have, for the capabilities I have, and how am I going to deploy those resources? And you do it two different ways, right? You think about those that you're going to deploy over a one-year or two-year horizon on a set of projects and opportunities. But you also keep running at the more routine stuff, the short duration projects, and you keep that alive in the market.

turning away work? Or how have you been managing backlog? We we you know, look, let's think about business in general, right? These are massive markets, even when times aren't as bullish as they are now.

When you run a company like ours, and you're running it at the subsidiary level, you're always focused on

what's the best opportunities in the market I have for the capabilities I have, and how am I going to deploy those resources? And you do it two different ways, right? You think about those that you're going to deploy over

Anthony J. Guzzi: You think about those that you're going to deploy over a one-year or two-year horizon on a set of projects and opportunities, but you also keep running the more, you know, routine stuff, the short-duration projects, and you keep that alive in the market. And you know, we're blessed here at EMCOR because our team, our subsidiary CEOs, I would say, with the guidance of the segment folks, are masters at thinking about how you take a resource and deploy it in the most effective way possible. You know, you can you'd always say, you know, I've never been one to say, Oh, we're turning away all kinds of work. We're doing this or that. Because I don't believe that's what we actually do.

a one-year or two-year horizon on a set of projects and opportunities. But you also keep running at the more, you know, routine stuff, the short-duration projects, and you keep that alive in the market.

Tony Guzzi: And, you know, we're blessed here at Mcore; it is our team, our subsidiary CEOs. I would say, with the guidance of the segment, folks are masters at thinking about how you take the resource and deployment the most effective way possible. You know, you can, you know, you can always say, you know, I've never been one to say, oh, we're turning away all kind of work. We're doing this. Because I don't believe that's what we actually do. I think we say, this is a team we're playing with. This is what we have. This is how we're building workforce capability.

And, you know, we're blessed here at EMCOR is our team, our subsidiary CEOs, I would say with the guidance of the segment folks, are masters at thinking about how you take the resource and deploy them in the most effective way possible.

Anthony J. Guzzi: I think we say this is the team we're playing with. This is what we have, this is how we're building workforce capability, and we're going to grow two ways. Either we can do more projects because we've built more capability with foremen and superintendents of that, or the size of the projects is going up in some cases, and that multi-year opportunity, and that person can run bigger work over a longer time period.

You know, you can you'd always say, you know, I've never been one to say, Oh, we're turning away all kind of work. We're doing this or that. Because I don't believe that's what we actually do. I think we say this is the team we're playing with.

Tony Guzzi: And we're going to grow two ways: either we can do more projects because we build more capability with form and superintendents of that. Or the size of the projects going up in some cases, and that multi-year opportunity, and that person can run bigger work over a longer time period. So I don't think we're labor short. We're always looking for great labor. We have great labor. I think, though, that, you know, if you have a meetering. It's not around the actual labor in, you know, the journeyman, the apprentices, and the wiremen and those folks. The labor shortage is, if you're going to have any, it's about your workforce development over time.

This is what we have, this is how we're building workforce capability, and we're going to grow two ways. Either we can do more projects, because we've built more capability with foreman, superintendents of that, or the size of the projects going up in some cases, and that multi-year opportunity, and that person can run bigger work over a longer time period.

Anthony J. Guzzi: So I don't think we're labor short. We're always looking for great workers. We have great labor. I think, though, that if you have metering, it's not around the actual labor, the journeymen, the apprentices, and the wiremen, those folks. The labor shortage, if you're going to have any, it's about your workforce development over time, would be in the foreman, the project managers, the project executives, and the skilled estimating resources you have.

So I don't think we're labor short. We're always looking for great labor. We have great labor. I think though that, you know, if you have a metering, it's not around the actual labor in, you know, the

The journeymen, the apprentices, and the...

Wireman, those folks.

The labor shortages, if you're going to have any, it's about your workforce development over time, would be in the foreman, the project managers, the project executives, and the skilled estimating resources you have, and we're always developing those. So it very much is a how you're going to manage the mix in your local geography, and how we're going to manage the mix across EMCOR.

Tony Guzzi: We'd be in the foreman, the project managers, the project executives, and the skilled estimating resources you have. And we're always developing those. So it very much is a how you're going to manage the mix in your local geography and how we're going to manage the mix across him. Corp.

Anthony J. Guzzi: And we're always developing those. So it very much is how you're going to manage the mix in your local geography and how we're going to manage the mix across them. And then, Tony, how do you think about your potential to grow margins from here? I've been looking at EMCOR for about as long as you've been CEO, and I mean, it's just amazing the productivity and the margins you guys are generating.

Tony Guzzi: And then, Tony, how do you think about your potential to grow margins from here? I've been looking at EMCOR for about as long as you've been CEO. And I mean, it's just amazing the productivity and the margins you guys are generating. A lot of stuff's got to come together. And it has been coming together. You got to start with, you know, all those things we've talked about: workforce development, investments in technology, best practice sharing, best, and that goes across from estimating, mixed management, means in methods, virtual design and construct, BIM, supply chain management. I mean, you really have to take your, what you're doing well, and spread that through the company.

And then, Tony, how do you think about...

Your potential to grow margins from here.

I've been looking at EMCOR for about as long as you've been CEO , and I mean, it's just amazing.

Anthony J. Guzzi: A lot of stuff's got to come together, and it has been coming together. You got to start with, you know, all those things we've talked about, workforce development, investments in technology, best practice sharing, and that goes across from estimating mixed management, means, and methods. Virtual Design and Construct, BIM.

The Productivity and the Margins you guys are generating. Yeah, a lot of stuff's got to come together. And it has been coming together. You've got to start with...

You know, all those things we've talked about, workforce development, investments in technology, best practice sharing, and that goes across from estimating, mix management.

means and methods.

Anthony J. Guzzi: Supply Chain Management. I mean, you really have to take what you're doing well and spread that through the company. And that's one way to get margin. You know, we're in a tough business. And so the absence of badness is a big deal.

Virtual Design and Construct, BIM.

Supply chain management. I mean, you really have to take your what you're doing well and spread that through the company. And that's one way to get larger. The second thing is

Tony Guzzi: And that's one way to get more into the second thing is, you know, we're to frame our folks pretty strongly on contract negotiations, and when it's a more difficult negotiation, we've enhanced our legal capability to be able to respond and be thoughtful. And then when we do run into a problem like not everything's perfect all the time, you know, we're prepared for that dispute with facts and adherence to the contract, so we can get a better result than we may have gotten five, eight years ago. And then I think the other thing is, you got to have good markets where you get good absorption in, and you're working alongside the customer to get a good result.

Anthony J. Guzzi: And so we've invested in and trained our folks pretty strongly on contract negotiations, and when it's a more difficult negotiation, we've enhanced our legal capability to be able to respond and be thoughtful. And then when we do run into a problem, like not everything's perfect all the time, we're prepared for that dispute with facts and adherence to the contract so we can get a better result than we may have gotten five, eight years ago.

You know, we're in a tough business. And so absence of badness is a big deal. And so we've invested and trained our folks.

pretty strongly on contract negotiations. And when it's a more difficult negotiation, we've enhanced our legal capability to be able to respond and be thoughtful. And then when we do run into a problem, like not everything's perfect all the time, you know, we're prepared for that dispute with facts.

and adherence to the contract so we can get a better result than we may have gotten 5-8 years ago.

Anthony J. Guzzi: And then I think the other thing is, you got to have good markets where you get good absorption and you're working alongside the customer to get a good result. And you know, where do margins go from here? I mean, obviously, we believe for the rest of the year, they're about the same as you go to the... Right, Jason?

And then I think the other thing is you've got to have good markets where you get good absorption in and you're working alongside the customer to get a good result.

Jason Nalbandian: And, you know, where do margins go from here? I mean, obviously, we believe for the rest of the year, they're about the same. If you go to the right, Jason? Yeah, if you look at the guidance, really what we've assumed there, and I touched on the midpoint, right? Which is, if you look at the midpoint of our guidance, we're saying we can repeat in the back half of the year what we've done through the first six months of the year. When you look at the low end of the guidance, we're essentially saying we believe that at the low end, we can achieve the record margins that we achieved in the back half of last year.

And, you know, where do margins go from here? I mean, obviously we believe for the rest of the year, they're about the same as you go to the right. Jason, if you look at the guidance, really what we've assumed there, and I touched on the midpoint, right, which is if you look at the midpoint of our guidance, we're saying we can repeat in the back half of the year what we've done.

Jason R. Nalbandian: Yes. If you look at the guidance, really what we've assumed there, and I touched on the midpoint, right, which is that if you look at the midpoint of our guidance, we're saying we can repeat in the back half of the year what we did through the first six months of the year. When you look at the low end of the guidance, we're essentially saying that we believe that even at the low end, we can achieve the record margins that we achieved in the back half of last year.

through the first six months of the year. When you look at the low end of the guidance, we're essentially saying we believe that at the low end, we can achieve the record margins that we achieved in the back half of last year. And if you look at the high end, we're essentially assuming 30 to 40 basis points above where we're at today.

Jason Nalbandian: And if you look at the high end, we're essentially assuming 30 to 40 basis points above where we're at today. Got it.

Jason R. Nalbandian: And if you look at the high end, we're essentially assuming 30 to 40 basis points above where we're at. Got it. Okay, guys. Thank you. The next question comes from Alex Dwyer from KeyBank Capital Markets. Please go ahead. Good morning.

Brent Thielman: Okay. Thanks, Gus.

Brent Thielman: Thank you.

Alex Dwyer: The next question comes from Alex Dwyer from Keeping Capital Markets.

Got it. Okay. Thanks, guys. Thank you.

The next question comes from Alex Dwyer from KeyBank Capital Markets. Please go ahead.

Alex Dwyer: Please go ahead. Good morning. Thanks for taking my questions.

Alexander David Dwyer: Thanks for taking my questions. You bet, Alex. Yep. Can you talk about which geographies in the country are seeing the highest growth right now? And would there be any other similar geographies that you'd call out as being weaker versus stronger right now?

Alex Dwyer: You bet, Alex. Yep.

Good morning. Thanks for taking my questions. You bet, Alex.

Tony Guzzi: Can you talk about which geographies in the country you are seeing the highest growth right now? And would there be any other, like, geographies that you'd call out as being weaker versus stronger right now? You know, it's fairly broad base in the markets that we're in. So, but if you go to where the real growth is coming from, I think you'd have to say Texas, specifically around high tech manufacturing and data centers. I think the Midwest has been fairly strong for us. And that's driven by auto data centers and just general construction across the Midwest and even still some cold storage and things like that.

Can you talk about which geographies in the country you are seeing the highest growth right now? And would there be any other like geographies that you'd call out as being weaker versus stronger right now?

Anthony J. Guzzi: You know, it's fairly broad-based in the markets that we're in, so but if you go to where the real growth is coming from, I think you'd have to say Texas, specifically around high-tech manufacturing and data centers. I think the Midwest has been fairly strong for us, and that's driven by auto data centers and just general construction across the Midwest and even some cold storage and things like that. I think Arizona has been very strong for us. I should expect the Mid-Atlantic has been very strong for us, New York City, sort of flattish.

You know, it's fairly broad based in the markets that we're in.

So, but if you go to where the real growth's coming from, I think you'd have to say Texas.

specifically around high-tech manufacturing and data centers.

I think the Midwest has been fairly strong for us.

And that's driven by auto data centers and just general construction across the Midwest and even still some cold storage and things like that. I think Arizona has been very strong for us.

Tony Guzzi: I think Arizona's been very strong for us. I should expect the Mid-Atlantic's been very strong for us. New York City's sort of flatish. Again, we're mainly an aftermarket company in New York City now. I intend to fit up company. I think Boston has slowed a little bit. It's not yet from where it was five years ago, but it's slowed a little bit. I mean, some of the R&D facilities they were building have slowed. They were doing that sort of hotel concept around lab space. That's certainly slowed. California has been okay; an energy retrofit work in California has been pretty strong.

I should expect. The Mid-Atlantic's been very strong for us.

Anthony J. Guzzi: Again, we're mainly an aftermarket company in New York City now, a tenant-based company. I think, you know, Boston has slowed down a little bit. It's more flabby.

New York City is sort of flat-ish. Again, we're mainly an aftermarket company in New York City now, a tenant-fit-out company.

I think, you know, Boston is slowed a little bit. It's more flappid. It's up yet from where it was five years ago, but it's slowed a little bit. I mean, you know, some of the R&D facilities they were building have slowed. They were doing that sort of hotel concept around lab space. That's certainly slowed.

Anthony J. Guzzi: It's up from where it was five years ago, but it's slowed a little bit. I mean, you know, some of the R&D facilities they were building have slowed. They were doing that sort of hotel concept around lab space.

Anthony J. Guzzi: That's certainly slowed. California has been okay, and energy retrofit work in California has been pretty strong. Some of the healthcare work in California has been pretty strong. Oregon and Washington continue to be strong, especially around data centers. Assault Lakes is up. I mean, maybe not as strong as Arizona and other places, but still up. So it's pretty broad based; I would say sort of the Northeast is sort of flattish, again, going back.

California's been okay at energy retrofit work, and California's been pretty strong. Some of the healthcare work in California's been pretty strong.

Jason Nalbandian: Some of the healthcare work in California has been pretty strong. Oregon Washington continues to be strong, especially around data centers, assault lakes up. I mean, maybe not as strong as Arizona and other places, but still up. So it's pretty broad base. I would say sort of the Northeast is sort of flattish. Again, going back. The rest of the country, I think, is doing pretty well. Jason, I think I think you're going to get under all tone. I'd add George and North Carolina. They're very strong for us right now. Got it. That's super helpful.

Oregon and Washington continues to be strong, especially around data centers.

Salt Lake's up. I mean, you know, maybe not as strong as Arizona and other places, but still up. So it's pretty broad based, I would say sort of the Northeast is sort of flattish, again, going back.

Anthony J. Guzzi: The rest of the country, I think, is doing pretty well. Jason? I think you're hitting a wall, Tony. I'd add Georgia and North Carolina.

The rest of the country, I think, is doing pretty well. Jason? I think you're hit on the roll, Tony. I'd add Georgia and North Carolina. They're very strong for us right now.

Jason R. Nalbandian: They're very strong for us. Got it. That's super helpful.

Alexander David Dwyer: And then, just lastly, with $800 million of cash on the balance sheet, no debt, how should we be thinking about M&A versus repurchases as we go into the second half of the year? Like, should we expect the M&A program to be concentrated more and looking after those high-tech manufacturing and data center end markets? And then, is there any change in the M&A pipeline at all? We have a good pipeline. Deals happen when they happen.

Tony Guzzi: And then just lastly, with the $800 million of cash on the balance sheet, no debt, how should we be thinking about M&A versus repurchases as we go to the second half of the year? Like should we expect the M&A program to be concentrated more and looking after those high-tech manufacturing and data center end markets? And then, is there any change in the M&A pipeline at all? You know, we have a good pipeline that deals happen when they happen. I would expect right now, I mean, obviously we're not afraid of doing a half-a-billion dollar deal, but right now what we're looking at is more the same of what we did here in the first half of the year, which we're very pleased with.

Got it. That's super helpful. And then just lastly, with the $800 million of cash on the balance sheet, no debt.

How should we be thinking about M&A versus repurchases as we go to the second half of the year like should we expect the

M&A program to be concentrated more and looking after those high tech manufacturing and data center end markets. And then is there any change in the M&A pipeline at all? Yeah, we have a good pipeline. Deals happen when they happen.

Anthony J. Guzzi: I would expect right now, I mean, obviously, we're not afraid of doing a half a billion or billion dollar deal. But right now, what we're looking at is more the same as what we did here in the first half of the year, which we're very pleased about. Our M&A execution over the last five years has been superb. And those who have known me over a long period of time know that M&A is very difficult.

I would expect right now, I mean, obviously, we're not afraid of doing a, you know, half a billion or billion dollar deal. But right now what we're looking at is more the same of what we did here in the first half of the year, which we're very pleased with.

Tony Guzzi: Our M&A execution over the last five years has been superb. And those have known me over a long period of time. I think M&A is very difficult. I think we've been a good B plus A minus student for a while here. The size of the deal goes up. The execution risk gets a lot harder, but so far we've executed well. We have a good pipeline. I'd be excited to turn it over here. I think we're going to continue to return cash to shareholders, and we're going to continue to grow the company through M&A and organic growth.

Our M&A execution over the last five years has been superb, and those have known me over a long period of time.

Jason R. Nalbandian: I think we've been a good B plus, A minus student for a while here. The size of the deal goes up, the execution risk gets a lot harder. But so far, we've executed well. We have a good pipeline. I mean, Jason, I'd turn it over to you.

I think M&A is very difficult.

I think we've been a good B-plus, A-minus student for a while here. The size of the deal goes up, the execution risk gets a lot harder. But so far, we've executed well. We have a good pipeline. I mean, Jason, I'd turn it over to you.

Jason R. Nalbandian: I think... I think we're going to continue to return cash to shareholders, and we're going to continue to grow the company through M&A and organic growth. I think that overall, right, no real change in strategy here. I think we'll continue to be balanced capital allocators. As Tony said, we're pleased with what we did through the first half of the year, right? We generated $412 million of operating cash, but our cash balance has remained largely unchanged from the end of 2023, and that's the acquisitions at $173 million, the share re-purchases at $149 million, our CapEx, and our dividends.

I think we're going to continue to return cash to shareholders, and we're going to continue to grow the company through M&A and organic growth. I think that overall, right, no real change in strategy here. I think we'll continue to be balanced capital allocators. As Tony said, we're pleased with what we did through the first half of the year, right?

Jason Nalbandian: I think overall, right, no real change in strategy here. I think we'll continue to be balanced capital allocators. As Tony said, we're pleased with what we did through the first half of the year, right? We generated 412 million dollars of operating cash, but our cash balance has remained largely unchanged from the end of 2023, and that's the acquisitions at $173 million. The sharey purchases at $149 million are CapEx and our dividends. In the back of our slide deck, I think it's slide 13, we've updated our historical capital allocation here. If you look where we are so far this year, it's weighted 45% to shareholder return and 55% to business reinvestment, and if you look over time, we're closer to 50-50, and we'll continue to strive for that over time.

[inaudible]

Jason R. Nalbandian: In the back of our slide deck, I think it's slide 13, we've updated our historical capital allocation here. If you look where we are so far this year, it's weighted 45 percent to shareholder return and 55 percent to business reinvestment. And if you look over time, we're closer to 50-50, and we'll continue to strive for that over time. So I think, in a long-winded way, the back half of the year should look very similar to the first half. I mean, I think, you know, I've always been a proponent of you don't force M&A.

where we are so far this year, it's weighted 45% to shareholder return and 55% to business reinvestment. And if you look over time, we're closer to 5050. And we'll continue to strive for that over time. So I think a long winded way to say the back half of the year should look very similar to the first half.

Tony Guzzi: So I think a long-winded way to say the back half of the year should look very similar to the first half. I mean, I think I've always been a proponent. You don't force M&A. I think some of the things we did here in the first half of the year, we've been talking to those people for three years. Some of the things we'll do a year from now, we've been talking to them for three years. I mean, we are so focused on making sure we have a good cultural. We'll get the numbers, right? If the cultural fits right, we're usually talking to a really good company that shares our values.

I mean, I think, you know, I've always been a proponent, you don't force M&A. I think you, you know, some of the things we did here in the first half of the year,

Anthony J. Guzzi: I think you know, some of the things we did here in the first half of the year. We've been talking to those people for three years. Some of the things we'll do a year from now, we've been talking to them for three years. I mean, we are so focused on making sure we have a good culture... We'll get the numbers right, right? If the culture fits right, we're usually talking to a really good company that shares our values, what we won't do, and also something we believe we can grow. Then it's something that adds capability.

We've been talking to those people for three years.

Some of the things we'll do a year from now, we've been talking to them for three years. I mean, we are so focused on making sure we have a good cultural fit.

We'll get the numbers right, right? If the cultural fits right, we're usually talking to a really good company that shares our values. What we won't do, and also something we believe we can grow.

Tony Guzzi: What we won't do, and also it's something we believe we can grow. There's something that adds capability to us. What we won't do is play the multiple game, right? We're not out there trying to say, well, we're at X and we can buy whatever's out there for a much, you know, seven to ten, and therefore we're creating value. That never works out well, especially it maybe works out well for the PE guys, but I can promise you that doesn't work out well as an operating company because we own them forever and we've got to build the businesses and they got to culturally fit.

Anthony J. Guzzi: What we won't do is play the multiple game, right? We're not out there trying to say, well, we're at X, and we can buy whatever's out there for a much lower price, you know, seven to 10, and therefore we're creating value. That never works out well, especially it maybe works out well for the PE guys.

It's something that adds capability to us.

and what we won't do.

is play the multiple game, right? We're not out there trying to say, well, we're at x and we can buy whatever's out there for a much, you know, seven to 10, and therefore we're creating value.

Anthony J. Guzzi: But I can promise you that it doesn't work out well as an operating company because we own them forever. And we have to build the businesses, and they have to culturally fit. So we're much more focused on that than anything else. And you can see the fruits of our M&A work today in our numbers, from deals we made 15, 16, 10, 12 years ago. We really haven't wavered from that, and it's paid significant dividends.

That never works out well, especially, maybe it works out well for the PE guys, but I can promise you that doesn't work out well as an operating company.

because we own them forever and we've got to build the businesses and they've got to culturally fit. So we're much more focused on that than anything else. And you can see the fruits of our M&A work today in our numbers.

Tony Guzzi: So we're much more focused on that than anything else, and you can see the fruits of our M&A work today in our numbers from deals we made 15, 16, 10, 12 years ago, and we really haven't wavered from that, and it's paid significant dividends for us. We start with management. If we don't believe the management has the skill and character and all the things and the competency that we all think is important, we won't buy the company because even if you can replace management, if those things aren't evident in the company, that belief runs through the entire company to create nothing but problems for us.

from deals we made 15, 16, 10, 12 years ago, and we really haven't wavered from that, and it's paid significant dividends for us.

Anthony J. Guzzi: We start with management. If we don't believe that management has the skill and character and all the things and the competencies that we all think are important, we won't buy the company because even if you can replace management.

We start with management.

If we don't believe the management has the skill and character and all the things and the competency that we all think is important

We won't buy the company because even if you can replace management.

Anthony J. Guzzi: If those things aren't evident in the company, that bleeds through the entire company, and that creates nothing but problems. Okay, can I squeeze one more in? For the data center build, is it possible to, like, parse through how much of the data center build you're working on is just coming from traditional-type data center builds we've seen over the past five years with the cloud, or how much is coming from these new AI-type data centers? We wouldn't have that kind of visibility. We just know that it's expanded. The only thing you could parse through is that maybe the power requirements have gone up, but they were going up anyway.

If those things aren't evident in the company, that bleeds through the entire company and that creates nothing but problems for us.

Alex Dwyer: Got it. Okay.

Tony Guzzi: Can I squeeze one more in? Is there for the data center build, is it possible to like, like parse through how much of the data center builds you're working on? It's just coming from traditional type data center builds we've seen over the past five years with the cloud, or how much is coming from these new AI type data centers. We wouldn't have that kind of visibility. We just know that it's expanded. The only thing you could parse through is maybe the power requirements have gone up. Today we're going up anyway. Ultimately we'll build the day center, we'll energize the racking, we'll do day two work.

Got it. Okay, can I squeeze one more in? For the data center build, is it is it possible to like

Like parse through how much of the datacenter builds you're working on is just coming from traditional type datacenter builds We've seen over the past five years with the cloud or how much is coming from these new AI type datacenters

We wouldn't have that kind of visibility. We just know that it's expanded. The only thing you could parse through is maybe the power requirements have gone up, but they were going up anyway. You know, ultimately, we'll build a data center.

Alexander David Dwyer: Ultimately, we'll build a data center. We'll energize the racking. We'll do day two work. But what's actually going on in there, we don't have a lot of visibility once we build it. Even if we're doing some of the maintenance there, we don't have a lot of visibility of what the customers are using for it.

Tony Guzzi: What's actually going on in there? We don't have a lot of visibility to post once we've built it, even if we're doing some of the maintenance there. We don't have a lot of visibility or what the customers are using for it. I thought we were headed the developers versus the five or six owners to build them. In there, there's really no difference, right? In the end of the day, those people are building them for the five or six people that would be building the data centers. Thank you. Appreciate the thoughts. You bet.

We'll energize the racking. We'll do day two work. What's actually going on in there? We don't have a lot of visibility to

post once we build it, even if we're doing some of the maintenance there, we don't have a lot of visibility of what the customers are using for it. I thought where you headed, the developers versus the five or six owners that build them.

And there, there's really no difference, right? In the end of the day, those people are building them for the five or six people that would be building the data centers.

Thank you. Appreciate the thoughts. You bet.

Tony Guzzi: Mr. Guzzi, we have no further questions. I would like to turn it back to you for closing remarks.

Mr. Guzzi, we have no further questions. I would like to turn it back to you for closing remarks. Sure. I'm just going to tell everybody thank you. I appreciate your interest in EMCOR.

Tony Guzzi: Sure.

Tony Guzzi: I'm just going to tell you right. Thank you.

Andrew Backman: Appreciate your interest in M4, and be safe, and that'll turn it over to Andy to close the software.

Andrew Backman: Thanks, Tony. Thanks, Jason and Maxine.

And be safe. With that, I'll turn it over to Andy to close us off here. Thanks, Tony. Thanks, Jason and Maxine. And thanks to all of you for joining us today. If you should have any follow-up questions, please do not hesitate to reach out directly. Thank you all again, and have a great day. Danielle, would you please close the call?

Andrew Backman: Thanks to all of you for joining us today. If you should have any follow-up questions, please do not hesitate to reach out directly. Thank you all again, and have a great day.

Danielle: Danielle, would you please close the call?

Danielle: Thank you.

Danielle: The conference is now concluded. Thank you for attending today's presentation.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Danielle: You may now disconnect.

Speaker Change: Thank you for watching!

Unknown Executive: Andrew Backman, Andrew Backman, Anthony Guzzi, Mark Pompa, Alexander Dwyer. Good morning.

Anthony J. Guzzi: Thank you. I appreciate the thoughts. Mr. Guzzi, we have no further questions. I would like to turn it back to you for closing remarks. Sure. I'm just going to tell everybody thank you. I appreciate your interest in EMCOR. And be safe.

Danielle: My name is Danielle, and I will be a conference operator today. At this time, I would like to welcome everyone to the EMCOR Group 2nd quarter 2024 earnings conference call. Our lines have been placed on mute to prevent any background noise. After the speakers' prepared 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. Keep at it. If you would like to withdraw your question, please press star, then two.

Danielle: Please note this call was being recorded.

Andrew Backman: I would now like to turn the call over to Andy Backman, Vice President of Investor Relations. Mr. Backman, you may begin.

Anthony J. Guzzi: And with that, I'll turn it over to Andy to close us off here. Thanks, Tony. Thanks, Jason, and Maxine.

Danielle: Please note, this call is being recorded. I would now like to turn the call over to Andy Backman, Vice President of Investor Relations. Mr. Backman, you may begin.

Andrew Backman: Thank you, Danielle, and good morning, everyone, and welcome to EMCOR 2nd quarter 2024 earnings conference call. For those of you joining us by webcast, we are at the beginning of our slide presentation that will accompany our remarks today. This presentation will be archived in the Investor Relations section of our website at mcoregroup.com.

Andrew G. Backman: And thanks to all of you for joining us today. If you should have any follow-up questions, please do not hesitate to reach out directly. Thank you all again, and have a great day. Danielle, would you please close the call? Thank you.

Danielle: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good morning.

Andrew G. Backman: Thank you, Danielle, and good morning, everyone, and welcome to EMCOR's second quarter 2024 Earnings Conference Call.

Danielle: My name is Danielle, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group Second Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Danielle: After the speaker's prepared 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.

Andrew G. Backman: Please note, this call is being recorded. I would now like to turn the call over to Andy Backman, Vice President of Investor Relations. Mr. Backman, you may begin.

Andrew G. Backman: For those of you joining us by webcast, we are at the beginning of our slide presentation that will accompany our remarks today. This presentation will be archived in the investor relations section of our website at emcorgroup.com.

Andrew Backman: With me today, are Tony Guzzi, our Chairman, President and Chief Executive Officer, Jason Albandian, Senior Vice President and M. Cours Chief Financial Officer, and Maxine Mauricio, Executive Vice President, Chief Administrative Officer, and General Counsel.

Andrew Backman: for today's call. Tony will provide comments on our second quarter. Jason will then review the second quarter numbers in detail before turning it back to Tony to discuss RPOs, as well as reviewing our revised 2024 guidance before we open it up for Q&A.

Andrew Backman: Before we begin, as a reminder, this presentation and discussion contain certain forward-looking statements and may contain certain non-GAAP financial information. Slide two of our presentation describes in detail these 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.

Speaker Change: Before we begin, as a reminder, this presentation and discussion contains certain forward-looking statements and may contain certain non-GAAP financial information.

Speaker Change: Slide 2 of our presentation describes in detail these forward-looking statements and the non-GAAP financial information disclosures.

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

Speaker Change: Finally, as a reminder, all financial information discussed during this morning's call is included in our consolidated financial statements.

Tony: Within both, our earnings press release issued this morning, and in our Form 10-Q filed with the Securities and Exchange Commission. And with that, let me turn the call over to Tony. Tony? Yeah, thanks, Andy. And good morning, and thanks, everyone, for joining our call. I am going to begin my discussion on page 4.

Tony Guzzi: And with that, let me turn the call over to Tony. Tony?

Tony Guzzi: Yeah, thanks, Andy.

Tony Guzzi: And good morning, and thanks everyone for joining our call. I am going to be being by discussion on page four. We had an exceptional first half of the year at EMCOR, and our results for the second quarter of 2024 further illustrate our continuum and an excellent execution in the field. Within the quarter, we set new quarterly records for revenues, operating income, operating margin, and diluted earnings per share. We grew revenues by 20.4 percent to 3.67 billion, achieved a consolidated operating margin of 9.1 percent, and earned $5.25 per diluted share. While revenues increase 17.7 percent organically, our POs of 9 billion remained at near-record levels, increasing 713 million, or 8.6 percent versus the year-ago period.

Tony: We had an exceptional first half of the year at EMCOR, and our results for the second quarter of 2024 further illustrate our continued momentum and excellent execution in the field.

Tony Guzzi: Our mechanical and electrical construction segments are driving our record performance. With the organic revenue growth in both the quarter and year-to-date period, although we're 33 percent in our mechanical construction segment and 18 percent in our electrical construction segment, we continue to be well positioned in the right geographies and market sectors. We are winning the right mix of work, estimating our opportunities with the appropriate contingency, negotiating our contracts with CARE, planning with discipline, and executing our work with precision and innovation. With the year-to-date operating margins of 11.8 percent for mechanical construction and 11.5 percent for electrical construction, we continue to perform well in large and growing market sectors with strong demand anchored in favor of markets for which also includes high tech and traditional manufacturing, network and communications, which includes data centers, institutional and healthcare that are benefiting from long-term secular trends.

Tony Guzzi: Our teams are executing with discipline and precision, aided by the full range of virtual design and construction tools. We call that VDC, and that also includes BIM, which you've heard me talk about, building information modeling, as well as excellent prefabrication, fill planning, supply chain management, and contract negotiation. These teams continue to focus on delivering impressive results for our customers on incredibly sophisticated and fast-paced projects with multi-year building plans. When we target these large sophisticated sites, we typically win 25 to 35 percent of the time. However, it is always important to remember, and I have said this many on many of these calls: after the initial project reward, future phases may be released in smaller increments, potentially affecting the timing and amount we recognize within our RPOs.

Tony Guzzi: Service. Even if the cumulative revenue from these subsequent phases is equivalent to the initial award that we had previously had in RPO's. This is partially reflected in the 2% decline in RPO's from the first quarter of 2024. Beyond our construction segments, our US Building Service segment is executing as we expected. Our mechanical services business is operating in high single-digit operating margins and is growing revenues at double digits. We are experiencing strength in all our mechanical service lines, including repair service, service agreements, retrofit HVAC projects, and building controls, installations, and upgrades. However, as we discussed in our year-end 2023 call on an annual basis, we have had nearly 300 million in revenue headwinds in our commercial site-based business due to the loss of certain facilities maintenance contracts on rebid, despite strong customer scores on our service delivery.

Tony Guzzi: Despite these headwinds, we still deliver quarterly and year-to-date operating margins of 6% and 5% in the US Building Service segment, and revenues grew about as expected by 4.1% year-to-date. Our industrial services segment reported as best-second quarter post-pandemic, and we saw improved demand for both our shop and field services on both a quarterly and year-to-date basis. Our shops continued to perform well, and the electrical business within this segment is experiencing increased demand, both from traditional upstream and midstream customers, as well as for certain renewable fuels projects. Our UK business continues to perform as expected and has had some success in building its pipeline and retooling its business development efforts.

Tony Guzzi: This segment has solid operating margins at 5.4% in the quarter and 5.3% on a year-to-date basis. We had strong operating cashflow of 412 million on a year-to-date basis, almost double from the year ago period. As I had said, our RPOs remain at near record levels at 9.0 building, and I will discuss more detail later, and our prospects remain strong. We successfully closed four acquisitions in the quarter for an aggregate upfront purchase price of 170 to 3 million net of cash required. These acquisitions bolster our mechanical construction, building services, and our industrial services segment.

Jason Nalbandian: With that opening, Jason, I'll turn it over to you. Thank you, Tony, and good morning everyone.

Jason Nalbandian: Over the next several slides, I will review the operating performance of each of our segments as well as some of the key financial data for the second quarter of 2024 as compared to the second quarter of 2023. I'm going to start on slide five with revenues. As Tony mentioned, consolidated revenues were $3.67 billion, an increase of $621.3 million for 20.4%, as demand for our services continues to be strong across the majority of the market sectors we serve. Each of our reportable segments experience year-to-year increases in revenues, and we achieved organic revenue growth of nearly 18%.

Jason Nalbandian: Looking at each of our segments, revenues of US electrical construction were 800 million, an increase of 18%. This segment continues to benefit from increased demand across many market sectors, with the most significant revenue growth once again coming from networking communications, which, as a reminder, is predominantly our data center project. In addition, this segment experienced increases in revenues within the transportation, high-tech manufacturing, and manufacturing and industrial market sectors. Revenues for US mechanical construction were 1.7 billion, increasing nearly 39 percent. This segment saw revenue growth across the majority of the market sectors in which we operate and benefited from greater levels of short duration projects and service work.

Jason Nalbandian: The strongest growth was seen within the high-tech manufacturing market sector, largely driven by continued demand for our mechanical construction and fire protection services by customers engaged in the design, development, and production of semiconductors or electric vehicles and lithium batteries. Beyond high-tech manufacturing, we also saw notable increases within network and communications, institutional, manufacturing and industrial, healthcare, and water and waste water. Demand within this segment continues to be broad-based. As expected, partially offsetting the growth for both of our construction segments was a decrease in revenues from the commercial market sector due to either reduced demand across the commercial real estate industry or the completion of various warehousing and distribution products, which were active a year ago.

Jason Nalbandian: Together, our domestic construction segments generated revenues of 2.5 billion and an increase of just over 31 percent. Moving to US building services, revenues were $781.1 million, representing a modest increase year over year. With revenues increasing 67.2 million or 13 percent, our mechanical services division within this segment continues to benefit from strong demand across its service lines, with the most significant growth coming from HVAC projects and retrofits. However, as anticipated and as discussed on prior calls, revenues of the segment were impacted by the non-renewable of certain contracts within our commercial and government-side-based businesses. The loss of these facilities made in its contracts largely offset the growth within mechanical services.

Jason Nalbandian: Looking at US industrial services, revenues were $324 million, increasing just under 11 percent, driven by improved demand across the Second Field Services division, coupled with greater new build heat exchanger sales within its shop services business. And lastly, UK building services delivered revenues of $106.6 million, in line with that of the prior year period.

Jason Nalbandian: If we turn to slide 6, for the quarter, we reported operating income of $332.8 million, or 9.1 percent of revenues. This compares favorably to operating income of $196.7 million, or 6.5 percent of revenues a year ago. Once again, a more favorable mix of work, exceptional project execution, and enhanced productivity, due in part to our investments in virtual design construction and prefabrication, continue to be key drivers of our improved performance. Looking at our segments, US electrical construction reported operating income of $88.6 million, which represents a nearly 75 percent increase and operating margin of 11.1 percent, which is a 360 basis point improvement.

Jason Nalbandian: Increased gross profit and gross profit margin were the primary drivers of this quarter's performance. While the most notable increases were experienced within networking communications, the segment additionally benefited from greater growth profit on projects within the transportation, institutional, high tech manufacturing, and manufacturing industrial market sectors. Operating income for US mechanical construction was $213.4 million, an increase of just over 78%, an operating margin of 12.9% expanded by 290 basis points. This segment experienced greater growth profit from the majority of the market sectors in which we operate, with the largest increases being generated within high tech manufacturing, networking communications, and commercial.

Jason Nalbandian: Together, our construction segments reported an operating margin of 12.3%. Operating income for US building services was $46.8 million, or 6% of revenues, in line with the year-ago period. Consistent with the revenue performance of this segment, increased growth profit and gross profit margin from our mechanical services division was largely offset by reductions within commercial and government site-based due to the headwinds we previously discussed. Moving to industrial services, operating income was $12.7 million, or 3.9% of revenues, representing nearly a 62% increase in operating income and a 120 basis point improvement in operating margin. In addition to the impact of greater revenues, operating income of the segment benefited from higher gross profit margin primarily within the shop services division due to favorable pricing and greater indirect cost absorption.

Jason Nalbandian: And lastly, UK building services reported operating income of 5.8 million or 5.4% of revenues, which is relatively consistent with the year-ago period.

Jason Nalbandian: Let's now turn to slide 7. A few highlights on this slide not covered by my previous commentary, starting with gross profit. Due to the combination of the revenue growth we just discussed, as well as a 260 basis point increase in gross margin, our gross profit of $684 million has increased by nearly 40%. While our SG&A has increased year over year, our SG&A margin for the quarter of 9.6% remains consistent with that of the year-ago period. And finally, diluted earnings per share was $5.25 compared to $2.95, an increase of 78%.

Jason Nalbandian: Briefly turning to slide 8. This slide outlines M-course performance for the first six months of 2024 and has been included here for your reference. Rather than go through our year-to-date results in detail, I wanted to simply highlight that we've had a tremendous start to the year, setting a number of new company records as we continue to deliver for our customers and shareholders. In a later slide, Tonal outline are updated earnings guidance for 2024. And I mention that now, as it is this performance which frames our updated guidance. As you can see on the page, we have earned a year-to-date operating margin of 8.3%.

Jason Nalbandian: This record margin serves as a key data point within our guidance, as the midpoint of such range reflects a full year operating margin in line with what we have achieved to date.

Jason Nalbandian: And finally, on slide 9, as we've previously stated, our balance sheet remains strong and liquid and continues to be a differentiator for us in the market. Further, the size and strength of our balance sheet, coupled with our significant cash generation, leaves us well positioned to fund organic growth, pursue strategic M&A, and return capital to shareholders. In addition to the organic growth we have generated thus far, this is evidenced in part by the $173 million we have spent on acquisitions and the $149 million we have utilized for share repurchases year to date. Although not shown on this slide, operating cash flow for the quarter was approximately $280 million, which represents 84% of operating income, and on a year-to-date basis, we have generated $412 million of operating cash, equivalent to 70% of operating income.

Tony Guzzi: With that, I'll turn the call back over to Tony for a discussion on RPOs. Thanks, Jason, and I'm going to be speaking to pages 10 and 11, and I want to start on page 10. Now, page 10, you'll see a slide I have referenced before. The format's a little different, and it's really the same slide as you will see in our new corporate overview presentation that we launched this quarter. This slide highlights some of the key market sectors where we are seeing growth, and in many ways, this chart informs how we allocate resources to drive organic growth.

Tony Guzzi: And as I discuss RPOs, if I were you, I would take size 10 and 11, put them side by side, and you can follow the discussion with more ease. And the reality is I discussed these RPOs; there's no or shattering news here. These are the trends we've been seeing at least over the last eight quarters, and it's how we set the business up to succeed. So rather than in review this slide in detail because it is a continuation of what we've talked about, I'm going to discuss our RPOs as they relate to the five key trends outlined on the top of this chart.

Tony Guzzi: So if you look at data centers and connectivity, we can continue to see strong demand for hyper scale data center work, and we report that in the network and communications market sector. At the end of the quarter, RPOs in the sector were a record 1.7 billion; there are 489 million, or nearly 40% year over year and 2% sequentially. We continue to believe that we are not only in the early endings of the overall data center expansion but that we have successfully positioned ourselves in the key data center geographies and we expanded our presence in these markets since 2009.

Tony Guzzi: 19. Resurring and nearsharing coupled with our work in the high tech manufacturing sector really cuts across both the high tech manufacturing sector and the manufacturing industrial sector. In the high tech manufacturing sector, that's where we had RPOs 1.3 billion at the end of the second quarter, and that includes semiconductors, pharma, biotech, life sciences, and the electric vehicle value chain. RPOs in the sector were up 58 million, or 5%, from the year-ago period, and we continue to believe the long-term fundamentals are solid. As we have stated many times before, we expect Epson flows in certain areas of the project award and, as a result, project work within the sector.

Tony Guzzi: As awards will happen in different amounts and different contract structures, what should become on the site and you're working on a site that has a multi-phase and multi-year building program. In addition to high tech manufacturing, we continue to have a healthy base of ours in the traditional manufacturing industrial market sector, and they total $782 million at quarter end. In turn to energy efficiency and sustainability, and that's also ties into short duration projects, which I'll cover in a little bit, we continue to take sale with Retrofit Project Work, especially within the Mechanical Services Division of our U.S.

Tony Guzzi: Building Services segment, where we saw a year-over-year increase in RPOs of just over 9%. Much of this work is focused on not only retrofit of AIDS equipment, but gaining efficiency with implementing a building automation upgrade, coupled with gaining a significant efficiency gains with new HVAC equipment. And lastly, on this page, health carriers and area we expect to see continued demand, with record RPOs at the end of the quarter of $1.2 billion, which is up almost 14% from the year-of-grow period. Water and wastewater, which analysis total $602 million, is up 24% year-over-year. The word of these projects is typically episodic in nature due to the size and scope of the work, and most of our work is predominantly performed in Florida.

Tony Guzzi: The institutional sector, which was just over $1.1 billion, up nearly 36% year-of-year, and that includes work for schools, universities, and local, state, and federal office buildings.

Tony Guzzi: And what are they spending on? They're spending on research facilities, enhanced and new classroom space, technology upgrades that spread across the campus, and renovation and retrofits for improved air quality, and a lot of projects to reduce energy consumption. And that's the price of projects that are driving demand in this market sector. Transportation, it grew about 39% for us, up 276 million, and its infrastructure awards largely focused around airports, and in short duration projects. Again, go back to my energy efficiency comments. They're very much the same. These are electrical upgrades, HVAC upgrades, technology upgrades where you bring more Wi-Fi in and enhancements, building controls upgrades to make the building more efficient, smarter, cleaner, and productive.

Tony Guzzi: And partially offsetting these increases, we experienced an RPO decrease within commercial. RPOs in this sector are now total $1.3 billion, and as a reminder, our exposure in this sector has weighted less towards new construction and high-rise in office projects, but more towards distribution-type project work and tenant fit-up projects. To conclude my RPO commentary, and as I said earlier, total company RPOs at the end of the second quarter were approximately $9 billion, up $713 million, or 8.6% year over year. We are pleased with our performance in RPO; we're pleased with the mix in our RPOs, especially considering the strong revenue growth we've had in the second quarter, which we'd like to. Very strong demand for our services, and what you're most worried about, our pipeline remains robust.

Tony Guzzi: So now we'll go to crates 12, and I'm going to conclude. With the strong first half performance we had, we're going to raise guidance. We're going to raise our revenue guidance to 14.5 to 15 billion, and we're going to increase our earnings per diluted share guidance from 15.50 to 16.50 to 19 to $20. We are seeing incredible execution in the field, and the operating margins in our construction segments are more resilient and higher than we have experienced in the past or expected at the beginning of the year. We expect these trends to continue with respect to our success in bidding, winning, and executing work in favorable market sectors that I've outlined, such as networking communications, to include data centers, high-tech manufacturing, energy efficiency work, healthcare, and traditional manufacturing and industrialization.

Tony Guzzi: Bureau. Further, we expect our U.S. and UK building services segments continue to perform as outlined in previous calls, and we expect the industrial services segment to perform at its highest level post-pandemic. We will continue to face challenges on markets, especially in our site-based services business in the U.S. and U.K. macro factors such as higher interest rates, a presidential election which may slow decision-making, supply chain and energy price disruptions, and global conflicts will continue to pose challenges for us. But, as we have done in the past, we will continue to plan and execute as best we can to overcome these challenges.

Tony Guzzi: Also, we remain diligent in how we serve our commercial real estate and private equity customers, as high interest rates and scarcity of capital can impact their businesses. Finally, as I always do, I want to thank all of our EMCOR leaders and teammates for their hard work and dedication to serving our customers in a safe and productive way.

Tony Guzzi: We have a very talented team here at EMCOR, guided by our EMCOR values of mission-first, people always, and we'll continue to be focused on executing our mission for our customers and shareholders while keeping EMCOR a great place to work for our employees.

Danielle: With that, Danielle, I will take questions.

Danielle: We will now begin the question and answer session. To ask a question, you may press star, then one on your touch tone phone. If you are using a speaker phone, please pick up your hands set before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

Brent Thielman: The first question comes from Brent Filman from DA Davidson. Please go ahead.

Brent Thielman: Hey, thanks.

Brent Thielman: Good morning. Congrats on a huge quarter here.

Tony Guzzi: Thanks, Brent. Tony, maybe just a start.

Tony Guzzi: Can you talk about maybe the pike line of potential opportunities you're still seeing in high-tech and sort of manufacturing and industrial? I think just looking for any other evidence, this sequential reduction RPO's is more likely temporary and timing related as I think you're ultimately suggesting here. Yeah, I mean, look, you think big picture, right? These are sites that are going to be developed over 10 to 15 years. And so nothing's changed, right? The fabs are moving from Taiwan back to the US, so there's near-shoring. There's expanded need for chips because of AI. And all that remains true today, just like it did last quarter, the quarter before that, the quarter before that, and the quarter before that.

Tony Guzzi: We executed at a fairly high-brain burn rate on one of those sites; we hit peak manpower and we hit peak scope, right? We're at the sweet spot on one of the major sites. And that's a good thing. You can see that in our cash flow, and you can see that in the execution and the drop-through in our mechanical business, especially when you get focused on high-tech. So if you go to the semi-conductor sector, we're bullish on the sites we're on. We have good line of sight to multi-year projects. But, like I've said before, sometimes the multi-year projects now come in different chunks.

Tony Guzzi: We're there now. We're working, we're part of the team, you know, we're developing the site, and then sometimes they'll come in in a different contracting form, or they will come back in lump sum. Our job is to make sure we stay as part of that team, execute well, finish the work well, get a commission well, and move to the next wave. Most of these sites, the three or four big ones we're on, have three or four more fabs they're going to build. And it's not like they jump from one to the other, and everything happened, literally.

Tony Guzzi: So we feel really good about semiconductors and nothing's changed on our outlook on pharma and biopharm either. The lot going on, we're in the right places, especially in Research Triangle Park in Indiana and in New Jersey, and these are long-term building programs. Again, where you will hit a revenue run rate where we're at now, which is hard to keep up with the RPOs. And then again, go back to the contracting mechanism and reassuring, we show you really no change. As far as EVs, I've said this before, we were actually very careful about how we did this. We really led with fire life safety. The structures are getting built, they're going to continue to get built as they build on site. The next phase will be equipment and placement that has slowed down. That was never the biggest part of what we were doing; it was a big part of what we did, like Jason said in the second quarter, but it was never the biggest part of what our high tech manufacturing exposure has been. And look, I have a personal view, it doesn't really matter whether it's 12%, 15%, or 20% or 30%, it's going to be somewhere in their VV penetration, and then more things will be built. There'll be consolidation in that space and we'll be very careful. We've always been careful how we serve the automotive sector because it is a very episodic type business and quite frankly, they're very difficult customers and you have to be careful. And then finally, as you go to other near shoring, we continue to see that as a long-term trend. That trend was happening before COVID, COVID accelerated it, and it continues to be as people look to reassure and expand their supply chains. So that's a long-winded answer to what we're seeing there, but we still are very bullish yet on what's happening in high tech manufacturing and manufacturing and industrial. That's that's helpful too, I appreciate that. And then just in terms of the profitability of the company overall, I mean continue to attain new highs and Tony just you could sort of compare and contrast what is bid margins, what customers are willing to pay to bring you in versus just, you know, simple.

Tony Guzzi: Yeah, fact of execution and the field be helpful to get your. That those things are really hard to separate because, on these bigger projects, which is really what's driving our margins. Most times we are working in a collaborative way with the customer to be able to fit inside their budget and come up with solutions that work with their budget. So it gets really hard to talk about pricing. I think you know productivity and our ability to do virtual design and construct and enter earlier in the design phase and do it. And we're not, we're not design builders necessarily, but upstream to do engineering assist, which will then compress the time and get the drawings right to begin with.

Tony Guzzi: And then to be able to develop a good model that we can all work from and build with and not run into the collisions and things you do on the worksite. And then take that bin plan and drive it to a very thoughtful prefabrication and supply chain management plan and work with our suppliers. I think you know I my gut three quarters of this is coming from productivity and means and methods and planning, and a quarter of it's coming from price or less because there's too much work going on on productivity. And it's or two linked with these customers on the bill to think it could be price, and let's be clear.

Tony Guzzi: Nothing's changed in this business as far as anything we do is. There's competition, and these are large, sophisticated customers that know how to drive competition to a site.

Tony Guzzi: Tony, I guess my last question really kind of just with respect to the, you know, considering the outlook for rest of 2024, and this is just a massive year and, you know, potential accomplishment. I know you have a second app to work through just from an earnings perspective, and I'd appreciate your perspectives on how you think the company can build off of this sort of incredible year, provided these kind of end-market drivers staying in the subsequent years. I mean, I always think about things, right? I think you know, in general, very cautious and conservative, right?

Tony Guzzi: By nature, and I think that's why we've had this long-term record of success and what is a pretty difficult business. I think about things, maybe a little differently, right, in a sense of, you got to put the enablers in pace to allow growth, and you got to be positioned with the right customers in the right place. And so the question is, are you continuing to expand the geography you can serve and the sites you can serve? Have you opened up the types of things you can do? An example of that is we continue to look for opportunities to expand the geographies brand.

Tony Guzzi: Our acquisition program in the first part of this year and really over the last number of years forever has been a focus on that. But then you've got to think about, okay, I've built a capability to do this kind of project in this geography with this subsidiary. Are there other people that have the capability to do that? They do projects that are similar, and that it's coming to their geography. Can we do a lot of peer learning? Can we have people teach them how to do the project planning upfront? Can they come and learn the means and methods?

Tony Guzzi: So I don't know what end demand will ever be, right? We try to position ourselves to markets we think are growing. But I do know if you continue to build capability within your workforce, you continue to build capability in the number of markets you can serve. And if you continue to train your leaders the right way, and how you treat people, and how you lead, and how you plan, and you do those things right, then long term you can build on success. And I think that's the playbook we've been following for a while. I think we're in a period now that obviously it's accelerated over these past three years.

Tony Guzzi: But I think a lot of that is investments that we made five, ten years ago to continue to build that workforce and build the culture that we have that allows for transparency, that allows for teamwork, that allows for respect and share ideas across our company. And then you couple that with a strong focus on discipline and discipline execution, and then you always keep safety of your workforce and your planning paramount. I think you get good results, and you position yourself well with key customers. You can grow with them as they expand what they're doing.

Brent Thielman: Okay, thanks, Tony. I'll get back in here.

Adam Thalhimer: The next question comes from Adam Thalheimer from Thompson and Davis. Please go ahead. Hey, good morning, guys.

Tony Guzzi: Also, good rats on the great quarter. Tony, is the headwind you talked about within Commercial? Is that coming in any different than you anticipated?

Tony Guzzi: No, I think I think we'd say this. Maybe you can elaborate on this and put some context on. It's exactly where we thought it was. should be. And quite frankly, we might have had this decline, even if the commercial work over strong, because we would have pivoted our resources to some of the high tech manufacturing and traditional manufacturing anyway, because it's longer term, larger projects, more difficult projects, which is right in our wheelhouse, especially on the fire life safety side. So we would have, not the way we're short of the workforce, but we would have pivoted some of that workforce to a more lucrative market anyway.

Jason Nalbandian: Jason, you got Tony; I would agree with that. I think, I think right on the commercial side, it is the only market sector where, on a quarter-day basis, we are down on the construction side. It's exactly what we expected, both electrically and mechanically, and as Tony said before, we've pivoted ourselves elsewhere where we are seeing growth. And then on commercial, if the question is specific to commercial site-based, where we've talked about the headwinds there, it's exactly the contracts that we spoke about at the end of December. The revenue decline there is exactly what we anticipated, and building services is operating collectively as a segment where we thought it would be, right?

Tony Guzzi: The growth in the quarter being 1% and on a year-to-day basis at 4%. Okay. And then, presumably, you know, you're running pretty flat out. I assume your guys are fully engaged. You're probably having some labor availability issues, if anything.

Tony Guzzi: I mean, if you guys have been turning away work, or how have you been managing backlog? We, you know, look, let's think about business in general, right? These are massive markets even when times aren't as bullish as they are now. When you run a company like ours and you're running it at the subsidiary level, you're always focused on which the best opportunities in the market I have, for the capabilities I have, and how am I going to deploy those resources? And you do it two different ways, right? You think about those that you're going to deploy over a one-year or two-year horizon on a set of projects and opportunities.

Tony Guzzi: But you also keep running at the more, you know, routine stuff, the short duration projects, and you keep that alive in the market. And, you know, we're blessed here at M-Core; it is our team, our subsidiary CEOs. I would say, with a guide into the segment, folks, our masters at thinking about how you take the resource and deployment the most effective way possible. You know, you can, you know, always say, you know, I've never been one to say, oh, we're turning on our way, all kind of work. We're doing this or that, because I don't believe that's what we actually do.

Tony Guzzi: I think we say, this is a team we're playing with. This is what we have. This is how we're building workforce capability. And we're going to grow two ways. Either we can do more projects because we build more capability with performance, superintendents of that, or the size of the projects going up in some cases, and that multi-year opportunity and that person can run bigger work over a longer time period. So, I don't think we're labor short. We're always looking for great labor. We have great labor. I think, though, that, you know, if you have a metering, it's not around the actual labor, you know, the journeymen, the apprentices, and the wiremen and those folks.

Tony Guzzi: The labor shortage is, if you're going to have any, it's like a workforce development over time. We'd be in the foreman, the project managers, the project executives, and the skilled estimating resources you have. And we're always developing those.

Tony Guzzi: So it very much is a how you're going to manage the mix in your local geography and how we're going to manage the mix across them.

Tony Guzzi: and then Tony, how do you think about your potential to grow margins from here? I've been looking at Him core for about as long as you've been CEO. And I mean, it's just amazing the productivity and the margins you guys are generating. A lot of stuff's got to come together, and it has been coming together. You had to start with, you know, all those things we've talked about: workforce development, investments in technology, best practice sharing, best, and that goes across from estimating mixed management. Means in methods, personal design and construct, been supply chain management. I mean, you really have to take what you're doing well and spread that through the company.

Tony Guzzi: And that's one way to get more. To the second thing is, you know, we're to tough business and so absence of badness is a big deal. And so we've invested and trained our folks pretty strongly on contract negotiations, and when it's a more difficult negotiation. We've enhanced our legal capability to be able to respond and be thoughtful. And then when we do run into a problem, like not everything's perfect all the time, you know, we're prepared for that dispute with facts. And here's to the contract, so we can get a better result than we may have gotten five eight years ago.

Jason Nalbandian: And then I think the other thing is, you got to have good markets where you get good absorption in, and you're working alongside the customer to get a good result. And, you know, word and word just go from here. I mean, obviously, we believe for the rest of the year they're about the same. If you go to the right, Jason, if you look at the guidance, really what we've assumed there, and I touched on the midpoint, right, which is if you look at the midpoint of our guidance, we're saying we can repeat in the back half of the year what we've done through the first six months of the year.

Jason Nalbandian: When you look at the low end of the guidance, we're essentially saying we believe that at the low end we could achieve the record margins that we achieved in the back half of last year. And if you look at the high end, we're essentially assuming 30 to 40 basis points above where we're at today. Got it. Okay.

Alex Dwyer: Thanks, guys. Thank you.

Alex Dwyer: The next question comes from Alex Dwyer from Keeping Capital Markets. Please go ahead.

Alex Dwyer: Good morning.

Tony Guzzi: Thanks for taking my questions. You better. Yep.

Tony Guzzi: Can you talk about which geographies in the country you are seeing the highest growth right now? And would there be any other, like, geographies that you'd call out as being weaker versus stronger right now? You know, it's fairly broad-based in the markets that we're in. So, but if you go to where the real growth is coming from, I think you'd have to say Texas, specifically around high tech manufacturing and data centers. I think the Midwest has been fairly strong for us, and that's driven by auto data centers and just general construction across the Midwest. And even still, some cold storage and things like that.

Tony Guzzi: I think Arizona's been very strong for us. I'd expect to meet Atlantic's been very strong for us. New York City sort of flattish. Again, we're mainly at aftermarket company New York City now. I tend to sit up company. We'll get the numbers right, right. If the cultural fits right, we're usually talking to a really good company that shares our values. What we won't do, and also something we believe we can grow, then something that adds capability to us. And what we won't do is play the multiple game, right. We're not out there trying to say, well, we're at X and we can buy whatever's out there for a much, you know, 7 to 10, and therefore we're creating value.

Tony Guzzi: That never works out well, especially maybe it works out well for the PD guys, but I can promise you that doesn't work out well as an operating company, because we own them forever, and we've got to build the businesses and they got to culturally fit. So we're much more focused on that than anything else, and you can see the fruits of our M&A work today in our numbers.

Tony Guzzi: From deals we made 15, 16, 10, 12 years ago, and we really haven't wavered from that, and it's pays significant dividends for us. We start with management. If we don't believe the management has a skill and character and all the things in the competency that we all think is important. We won't buy the company because even if you can replace management, if those things aren't evident in the company, that believes for the entire company to create nothing, the problems for us. Got it. Okay. Ty squeeze one more in. Is it for the data center build?

Tony Guzzi: Is it possible to, like, parse through how much of the data center builds you're working on? Is it just coming from traditional type data center builds? We've seen over the past five years with the cloud or how much is coming from these new AI type data centers.

Tony Guzzi: We wouldn't have that kind of visibility. We just know that it's expanded. The only thing you can parse through is maybe the power requirements have gone up; the day we're going up anyway. You know, ultimately, we'll build the day center; we'll energize the racking; we'll do day two work. What's actually going on in there? We don't have a lot of visibility to post once we've built it. Even if we're doing some of the maintenance there, we don't have a lot of visibility or what the customers are using for. I thought where you added that developers versus the five or six owners to build them, and there, there's really no difference.

Tony Guzzi: Right. In the end of the day, those people are building them for the five or six people that would be building the data centers. Thank you. Appreciate the thoughts. You bet.

Tony Guzzi: Mr. Guazzie, we have no further questions. I would like to turn it back to you for closing remarks.

Tony Guzzi: Sure.

Tony Guzzi: I'm just going to tell right. Thank you.

Andrew Backman: Appreciate your interest in M4 and be safe, and that'll turn it over to Andy to close us off here. Thanks, Tony. Thanks, Jason and Maxine, and thanks to all of you for joining us today.

Andrew Backman: If you should have any follow-up questions, please do not hesitate to reach out directly.

Andrew Backman: Thank you all again, and have a great day.

Danielle: Danielle, would you please close the call. Thank you.

Danielle: The conference is now concluded. Thank you for attending today's presentation. You may now just.

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