EMCOR Group, Inc.

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 MCOR Group second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. 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. 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.

Thank you, Danielle, and good morning, everyone, and welcome to MCOR'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 mcoregroup.com. With me today are Tony Guzzi, our Chairman, President, and Chief Executive Officer, Jason Albandian, Senior Vice President and MCOR'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 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. 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. 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. 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 four. We had an exceptional first half of the year at MCOR, and our results for the second quarter of 2024 further illustrate our continued momentum and 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, 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-date 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 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 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 includes high-tech and traditional manufacturing, network and communications, which includes data centers, institutional, and healthcare that are benefiting from long-term secular trends. 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 on many of these calls, after the initial project award, future phases may be released in smaller 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 our RPOs. This is partially reflected in the 2% decline in RPOs from the first quarter of 2024. Beyond our construction segments, our U.S. 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 no 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. 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. 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 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 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. We had strong operating cash flow of $412 million on a year-to-date basis, almost double from the year-ago period. As I have 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.