EMCOR Group, Inc.

Good morning. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to the MCOR Group fourth quarter and full year 2025 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 and the number one on your telephone keypad. If you would like to withdraw your questions, you may press star and two. At this time, I'd like to turn the floor over to Lucas Sullivan, Director, Financial Planning and Analysis. Mr. Sullivan, you may begin.

Thanks, Jamie. Good morning, everyone, and welcome to MCOR's fourth quarter and full year 2025 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 mcorgroup.com. With me today are Tony Guzzi, our Chairman, President, and Chief Executive Officer, Jason Nalbandian, 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 fourth quarter and full year and discuss our RPOs. Jason will then review the fourth quarter and full year numbers, then turn it back to Tony to discuss our guidance before we open it up for Q&A. Before we begin, a quick reminder that this presentation and discussion contain 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 the disclosures in conjunction with our discussion and accompanying slides. And 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-K filed with the Securities and Exchange Commission. And with that, let me turn the call over to Tony. Tony? Yeah, thanks, Lucas.

Good morning, and welcome to our fourth quarter 2025 earnings call. I'm going to speak briefly to the fourth quarter in my opening comments, but we'll focus my introductory remarks on what drove our continued success in 2025. So I'm going to start on pages four through five of our earnings presentation. We had an excellent close to the year with our fourth quarter results. In the fourth quarter, we generated revenues of $4.5 billion, which represents 19.7% growth. We earned adjusted earnings per share of $7.19 per diluted share, a 13.8% increase from 2024, and delivered adjusted operating income of $440 million a 13.1% increase from 2024. We did this while achieving strong adjusted operating margins of 9.7%. Our adjusted results for the fourth quarter exclude the gain on the sale of our UK business and the transaction costs related to such sale. For the full year, our adjusted results include these items as well as the transaction costs incurred in the first quarter due to the acquisition of the Miller Electric Company. By any measure, 2025 was a tremendous year for us. We had record revenues of nearly $17 billion and record adjusted full year operating margin of 9.4% and at the high end of our guidance range. We also had a record adjusted diluted earnings per share of $25.87 per share, an increase of 20% from 2024. With operating cash flow of 1.3 billion, we continued our exceptional record of cash conversion. Our success once again demonstrates our ability to execute with discipline across our business as we drive innovation and efficiency to achieve exceptional outcomes for our customers. We have delivered sustained, strong results despite the fact that we are working on the most technically sophisticated, fast-paced, and demanding projects in our history. We had a great year, and we enjoyed delivering for our customers and our shareholders, notably We earned four-year mechanical and electrical construction operating margins of 12.8% and 12.1% respectively, demonstrating excellent execution across a diverse range of projects by size and market and geography. We did this while growing revenues of these segments by 10.1% and 51.8% respectively. We achieved a 6% operating margin in our building services segment, driven by the underlying strength of our mechanical services business, which achieved high single-digit operating margins and 6% growth. Virtually all that growth was organic. Demand for this business remains strong with a primary focus on aftermarket projects and retrofits. HVAC service and repair, building automation and controls upgrades and services, and indoor air quality and energy efficiency projects. We remained well positioned with our industrial services segment to serve a rebounding oil and gas industry. We divested our UK business to focus on our U.S. operations. We found MCOR UK a great strategic home and achieved a very strong result in the sale for our shareholders. We acquired Miller Electric, which is the largest acquisition in MCOR history. The integration is on track. Our leadership and values are aligned, and Miller will serve as a great platform for growth in the Southeast and Texas. In addition to Miller, we acquired nine other companies across our mechanical construction and building services segments. Collectively, these platform enhancing acquisitions will help us to better serve our customers. We repurchased almost 600 million in shares and increased our quarterly dividend to 40 cents per share. This return of cash to shareholders coupled with our organic investment and acquisitions affirms our successful balanced capital allocation strategy. We maintained our sterling balance sheet that allows for continued organic and acquisition growth. We maintained our industry-leading safety record in this demanding and complex environment with a TRI under one for the second year in a row. We earned inclusion into the S&P 500, and we were recognized by Fortune as the number one most admired company in the engineering construction industry. And we built our RPOs to $13.25 billion from $10.1 billion despite our record revenues. That's quite a year, right? Congratulations to our team and thank you for a great 2025. I'm now going to go to page 6. These RPRs, which I will now highlight. Which I will now highlight. 1.2% year over year and 17.6% organically. On a sequential basis, RPOs have increased 5.1 since September, or 3.6% organically. Driven by demand in our data center business, RPOs within the network and communications totaled a record 4.46 billion at the end of December, an increase of 1.65 billion, or nearly 60% year over year. We see no change in the momentum of the CapEx plans from our customers in this sector, and we have good visibility for the next two to three years as we work to support their build-up. Institutional RPOs have increased by just under $440 million, or 40% to $1.55 billion, largely as we continue to see demand for our services within the education sector, including from a number of colleges and universities. Manufacturing and industrial RPOs have increased by $201 million, or 23%. to $1.1 billion. As I mentioned last quarter, in addition to project awards driven by customers on-shoring and reshoring initiatives, growth in this sector has also benefited from certain food processing projects within our mechanical construction segment, as well as a renewable energy project in our industrial services segment. Led by our mechanical construction segment, water and wastewater RPOs have increased by $408.5 million, or nearly 60%, to $1.1 billion as we continue to win projects throughout Florida. And due to select project opportunities, RPOs within the hospitality entertainment have more than doubled year over year. I'm now going to turn to page seven, because I think it's important to look at some of the longer term trends, and what's really growing driving our growth over a sustained period of time, and also to highlight our diversity of demand. So now go to page seven, let's take a minute. I want you to focus your eyes on the middle of this page. And in this middle of this page, you'll see where we were on the left hand bar, At 1230 19, right, right before COVID. We were about 4.036 billion in RPOs. And I want you to focus your eyes on that royal blue bar or dark blue bar. And that's our network and communications business. And I want you to look over at 1231 25. Those network and communications RPOs are about 4.4 billion today, which is greater than our total RPOs at the end of 1231 19. But then look at the total number of 13.254 billion and realize that we have grown everything else by over eight and a half billion dollars. Now I want you to come over to the left side of the page and I want you to look at some of these long-term growth trends. I'm gonna spend a little bit of time and we've already done that with the near-term commentary. High-tech manufacturing on a compound annual growth rate, and that's an in and out of a major project, but from where we started in 12-31-19, which had some semiconductor work in it and pharma work in it, to where we are today, has grown by a compound annual growth rate of 48%, and we remain very bullish on this market with the demand for semiconductor chips, the reshoring of pharma, the growth in GLP-1 drugs and what's going to happen there, and just in general what has been reshorted in high tech and what's going to continue to grow. 48% compound annual growth. Right above that is network and communications. We thought we had a great data center business in 2019. We went from having a very strong data center business to a terrific data center business. Now, I'm not going to say we're the only ones that can do data center work at scale, but we're the only ones that can operate in about 17 markets electrically, and we're doing about seven markets now mechanically. And we're one of the only ones that can cover the whole country on fire and life safety projects in the data center business. Look at health care, 23%. That is a stable market for MCOR. It's been one of our long-term markets. And it's as complex to build a high-rise hospital as it is a data center. And that's why our electricians and our pipefitters can move between those sectors so easily, between high-tech manufacturing, network and communication, and really industrial work. They can move between those. And we do that. Institutional is up 20%. That was actually a surprise to us when we went back and looked at the compound annual growth rate and institutional across that sector. Water and wastewater is a great market for us, mainly in Florida. 24% compound annual growth driven by consent degrees from the EPA, driven by just growth in Florida, and driven by updating technology in these large wastewater plants. Transportation, as you talk about mixed management, we have decided to de-emphasize the transportation market, especially the electrical roadway market. It takes a while to get out, but that will continue to drop unless a big airport or a project like that comes in, and that would be then balancing against these other markets. I love the bottom. In commercial, as a GDP grower, it's pretty good considering the engine analysis happened over this period. But look at the short-duration projects. To me, that's a sign of what's going on across all the markets, especially in the built space. And that contains some commercial work. That contains some institutional work. That contains some manufacturing work. And these are projects that are going to last less than five months and typically have a ticket size of somewhere between $50,000 and $500,000. And then put on top of that, the big service base we have in MCOR across our fire and life safety projects, across our mechanical service business, and across even our day two electrical work. So what allows you to have that kind of compound annual growth across that sustained period of time? And these are in no particular order. First of all, you've got to be where your customers are. You have to be able to meet them where they are. You have to have national reach. You have to have the geographic footprint. But that's not enough. You can have a geographic footprint that can't execute. You have to have opportunistically traveled. You don't just travel to travel. We're not going to be the contractor that uses a labor broker and places labor around the country. For the most part, when we travel, we're traveling in our construction business with very strong union journeymen and commercial wiremen and others that can move around the country and check into the union and we draw from that. And we're an employer of choice. And that is driven by the strong field leadership we have at the local level. We've got the technical expertise. We have great prefabrication capability, VDC capability that we use to work across these sectors. And really, the VDC we use today in our data center business and the VDC we use today in our high-tech manufacturing was really honed in the healthcare sector over 20 years ago. We have a great reputation and safety record. It's really a hallmark of who we are and why we continue to attract the best trade labor Our customers want us to do the work for them. One of the benefits of scale to us is we can train, we can share means and methods, and we can share best practices across our country. And that allows us to have very strong acquisition pipelines over a sustained period of time and allows us to make the right smart growth organic investments. I think this page is something that really is a hallmark of our company. And I think this page is really what we have built together with our capital allocation strategy, which is on page 14. coupled with what is on page seven is what we get paid for to do to build a company that has great diversity of demand, can take advantage of the end markets in many cases, and then build a sustainable compounding record of success. With that, Jason, I'll turn it over to you. Thank you, Tony.