What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-07-25 · 129 added, 117 removed, 194 unchanged (56% of the section changed)

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Business of our Form 10-K for the year ended December 31, 2023.

The following table presents selected financial data for the three months ended June 30, 2024 and 2023 (in thousands, except percentages and per share data):

The following table presents selected financial data for the three months ended September 30, 2024 and 2023 (in thousands, except percentages and per share data):

For the three months ended

September 30,

Revenues $ 3,696,924 $ 3,207,598

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Operating income as a percentage of revenues 9.8 % 7.3 %

Net income attributable to EMCOR Group, Inc.

$ 270,263 $ 169,409

Diluted earnings per common share $ 5.80 $ 3.57

Revenues of $3.67 billion for the quarter ended June 30, 2024 set a new quarterly record for the Company and represent an increase of 20.4% from revenues of $3.05 billion for the quarter ended June 30, 2023.

Demand for our services continues to be strong across the majority of the market sectors we serve and, as described in further detail below, we experienced revenue growth within all of our reportable segments.

Revenues for the second quarter of 2024 included incremental acquisition contribution of approximately $80.9 million.

Operating income for the quarter ended June 30, 2024 was $332.8 million, or 9.1% of revenues, establishing new quarterly records for the Company with respect to both operating income and operating margin.

This compares to operating income of $196.7 million, or 6.5% of revenues, for the quarter ended June 30, 2023.

Revenues of $3.70 billion for the quarter ended September 30, 2024 set a new quarterly record for the Company and represent an increase of 15.3% from revenues of $3.21 billion for the quarter ended September 30, 2023.

Demand for our services continues to be strong across most of the market sectors we serve and, as described in further detail below, we experienced revenue growth within the majority of our reportable segments.

Revenues for the third quarter of 2024 included incremental acquisition contribution of approximately $84.9 million.

Operating income for the quarter ended September 30, 2024 was $363.5 million, or 9.8% of revenues, establishing new quarterly records for the Company with respect to both operating income and operating margin.

This compares to operating income of $235.0 million, or 7.3% of revenues, for the quarter ended September 30, 2023.

The $128.6 million increase in operating income, and corresponding 250 basis point expansion in operating margin, were predominantly a result of improved operating performance within our United States construction segments, as described in further detail below.

Operating income for the quarter ended June 30, 2024 included incremental acquisition contribution of $4.6 million, net of amortization expense attributable to identifiable intangible assets of $5.0 million.

Net income of $247.6 million, or $5.25 per diluted share, for the quarter ended June 30, 2024 compares favorably to net income of $140.6 million, or $2.95 per diluted share, for the quarter ended June 30, 2023.

While the majority of the increase in our diluted earnings per share was a result of the increased operating income referenced above, diluted earnings per share for the quarter ended June 30, 2024 additionally benefited from a reduced weighted average share count given the impact of common stock repurchases made by us throughout 2023 and the first half of 2024.

Operating income for the quarter ended September 30, 2024 included incremental acquisition contribution of $5.5 million, net of amortization expense attributable to identifiable intangible assets of $4.6 million.

Net income of $270.3 million, or $5.80 per diluted share, for the quarter ended September 30, 2024 compares favorably to net income of $169.4 million, or $3.57 per diluted share, for the quarter ended September 30, 2023.

While the majority of the increase in our diluted earnings per share was a result of the increased operating income referenced above, diluted earnings per share for the quarter ended September 30, 2024 additionally benefited from a reduced weighted average share count given the impact of common stock repurchases made by us throughout 2023 and the first nine months of 2024.

Impact of Acquisitions

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For further discussion regarding our acquisitions, refer to Note 4 - Acquisitions of Businesses of the notes to consolidated financial statements.

We acquired four companies during the first half of 2024 for upfront consideration of $181.8 million, inclusive of our estimates of customary working capital adjustments.

We acquired five companies during the first nine months of 2024 for upfront consideration of $192.3 million, inclusive of customary working capital adjustments.

These acquisitions are comprised of:

(a) two companies that have been included within our United States mechanical construction and facilities services segment, including:

(i) a leading plumbing services provider in the Southeast region of the United States and (ii) a full service provider of mechanical construction and maintenance services in Central Texas, (b) a company, that has been included in our United States building services segment, which provides building automation and controls solutions in the Northeast region of the United States, and (c) an instrumentation and electrical contractor, that has been included in our United States industrial services segment, which provides electrical, automation, digital integration, and fabrication services to various energy sector and process equipment customers.

(i) a provider of building automation and controls solutions in the Northeast region of the United States and (ii) a mechanical services contractor in the Western region of the United States, and (c) an instrumentation and electrical contractor, that has been included in our United States industrial services segment, which provides electrical, automation, digital integration, and fabrication services to various energy sector and process equipment customers.

We acquired eight companies during calendar year 2023 for total consideration of $99.6 million.

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The following tables present our operating segment revenues from unrelated entities and their respective percentages of total revenues (in thousands, except for percentages):

For the three months ended June 30,

For the three months ended September 30,

Total 2023 % of

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Total operations $ 3,696,924 100 % $ 3,207,598 100 %

For the six months ended June 30,

For the nine months ended September 30,

Total 2023 % of

6 unchanged sentences

Total operations $ 10,796,097 100 % $ 9,143,652 100 %

As described below in more detail, our consolidated revenues for the three months ended June 30, 2024 increased to $3.67 billion compared to $3.05 billion for the three months ended June 30, 2023, and our consolidated revenues for the six months ended June 30, 2024 increased to $7.10 billion compared to $5.94 billion for the six months ended June 30, 2023.

Revenues of our United States electrical construction and facilities services segment were $800.0 million and $1,564.7 million for the three and six months ended June 30, 2024, respectively, compared to revenues of $678.2 million and $1,322.9 million for the three and six months ended June 30, 2023, respectively.

As described below in more detail, our consolidated revenues for the three months ended September 30, 2024 increased to $3.70 billion compared to $3.21 billion for the three months ended September 30, 2023, and our consolidated revenues for the nine months ended September 30, 2024 increased to $10.80 billion compared to $9.14 billion for the nine months ended September 30, 2023.

Revenues of our United States electrical construction and facilities services segment were $845.0 million and $2,409.7 million for the three and nine months ended September 30, 2024, respectively, compared to revenues of $697.4 million and $2,020.3 million for the three and nine months ended September 30, 2023, respectively.

The increase in this segment’s revenues for both 2024 periods was primarily a result of growth within the network and communications market sector, predominantly due to our data center projects.

Increased demand for cloud computing and data storage, driven in part by the emergence of artificial intelligence, has resulted in a greater number of construction project opportunities for us in several of the geographies in which we operate.

In addition, this segment benefited from revenue growth within:

(a) the transportation market sector, due to certain infrastructure projects currently underway, (b) the high-tech manufacturing market sector, inclusive of construction projects for customers engaged in the design and manufacturing of semiconductors, and (c) the manufacturing and industrial market sector, driven by increased activity with various energy sector customers.

In addition, this segment benefited from revenue growth within a number of the other market sectors in which we operate, such as:

(a) the high-tech manufacturing market sector, inclusive of construction projects for customers engaged in the design and manufacturing of semiconductors, (b) the institutional market sector, given increased project revenues from certain schools and universities, (c) the manufacturing and industrial market sector, driven by increased activity with various energy sector customers, and (d) the transportation market sector, due to certain infrastructure projects currently underway.

These increases were partially offset by a reduction in revenues within the commercial market sector due in part to reduced demand across the commercial real estate industry.

Our United States mechanical construction and facilities services segment revenues for the three months ended June 30, 2024 were $1,655.2 million, a $461.1 million increase compared to revenues of $1,194.1 million for the three months ended June 30, 2023.

Revenues of this segment for the six months ended June 30, 2024 were $3,082.8 million, an $810.2 million increase compared to revenues of $2,272.7 million for the six months ended June 30, 2023.

This segment’s results for both 2024 periods included $56.2 million of incremental acquisition revenues.

Excluding the impact of acquisitions, the increases in this segment’s revenues were attributable to revenue growth within the majority of the market sectors in which we operate, as well as greater levels of short-duration projects and service work.

From a market sector perspective, we experienced notable increases within:

Our United States mechanical construction and facilities services segment revenues for the three months ended September 30, 2024 were $1,662.2 million, a $332.6 million increase compared to revenues of $1,329.6 million for the three months ended September 30, 2023.

Revenues of this segment for the nine months ended September 30, 2024 were $4,745.1 million, a $1,142.8 million increase compared to revenues of $3,602.3 million for the nine months ended September 30, 2023.

This segment’s results included $59.9 million and $116.0 million of incremental acquisition revenues for the three and nine months ended September 30, 2024, respectively.

For both the three and nine months ended September 30, 2024, this segment experienced notable increases in revenues within:

(a) the high-tech manufacturing market sector, as a result of stronger demand for our mechanical construction and/or fire protection services by certain customers:

(i) engaged in either the design and manufacturing of semiconductors or the production and development of electric vehicles and/or lithium batteries and (ii) within the biotech, life-sciences, and pharmaceutical industries, (b) the network and communications market sector, due to increased data center project activity as this segment benefited from the same market demand described above within our United States electrical construction and facilities services segment, (c) the institutional market sector, given several public sector projects which were active during the first half of 2024, (d) the manufacturing and industrial market sector, due to continued re-shoring of critical supply chain by certain of our customers as well as an increase in food processing project revenue, (e) the healthcare market sector, given an increase in projects throughout several of the regions in which we operate, and (f) the water and wastewater market sector, driven by construction activity on several projects within the Southeast region of the United States.

(i) engaged in either the design and manufacturing of semiconductors or the production and development of electric vehicles and/or lithium batteries and (ii) within the biotech, life-sciences, and pharmaceutical industries, (b) the network and communications market sector, due to increased data center project activity as this segment benefited from the same market demand described above within our United States electrical construction and facilities services segment, (c) the institutional market sector, given several public sector projects which were active during the first nine months of 2024, (d) the healthcare market sector, due to an increase in projects throughout several of the regions in which we operate, and (e) the water and wastewater market sector, driven by construction activity on several projects within the Southeast region of the United States.

Revenues of this segment for the nine months ended September 30, 2024 additionally benefited from increased activity within the manufacturing and industrial market sector, as a result of the re-shoring of critical supply chain by certain of our customers as well as an increase in food processing construction projects.

Partially offsetting these increases was a reduction in revenues within the commercial market sector, largely as a result of the completion of various warehouse and distribution projects, which were active in 2023.

Revenues of our United States building services segment for the three months ended June 30, 2024 were $781.1 million compared to revenues of $775.0 million for the three months ended June 30, 2023.

Excluding incremental revenues from acquired companies of $13.0 million, this segment’s revenues for the three months ended June 30, 2024 decreased modestly by $6.9 million, as revenue growth from its mechanical services division was more than offset by revenue declines within its commercial site-based services and government site-based services divisions due to the loss of certain facilities maintenance contracts not renewed pursuant to rebid.

Revenues of this segment for the six months ended June 30, 2024 were $1,562.3 million compared to revenues of $1,500.4 million for the six months ended June 30, 2023.

Excluding incremental revenues from acquired companies of $20.9 million, this segment’s revenues for the six months ended June 30, 2024 increased by $41.0 million as the revenue growth within its mechanical services division more than offset the aforementioned contract losses within the commercial site-based services and government site-based services divisions.

Within both 2024 periods, this segment’s mechanical services division benefited from increased:

Revenues of our United States building services segment for the three months ended September 30, 2024 were $796.9 million compared to revenues of $817.7 million for the three months ended September 30, 2023.

Excluding incremental revenues from acquired companies of $7.7 million, this segment’s revenues for the three months ended September 30, 2024 decreased by $28.5 million.

Revenues of this segment for the nine months ended September 30, 2024 were $2,359.2 million compared to revenues of $2,318.1 million for the nine months ended September 30, 2023.

Excluding incremental revenues from acquired companies of $28.6 million, this segment’s revenues for the nine months ended September 30, 2024 increased by $12.5 million.

Within both 2024 periods, this segment’s mechanical services division experienced increased revenues from:

(a) HVAC project and retrofit work, as a result of greater:

(i) project execution stemming from the increased availability of materials and equipment when compared to the prior year period, which experienced greater supply chain disruptions and delays, and (ii) demand for system upgrades and replacements, partially as our customers continue to seek ways to improve the energy efficiency or indoor air quality of their facilities, (b) service repair and maintenance volumes, given growth in our service contract base, and (c) building automation and controls projects, as we continue to expand our service offerings in this area.

Revenues of our United States industrial services segment for the three months ended June 30, 2024 were $324.0 million, compared to revenues of $292.3 million for the three months ended June 30, 2023.

Revenues of this segment for the six months ended June 30, 2024 were $678.1 million, compared to revenues of $623.2 million for the six months ended June 30, 2023.

This segment’s results for the three and six months ended June 30, 2024 included $11.7 million of incremental revenues from an acquired company.

Excluding such acquisition contribution, the increase in this segment’s revenues for both 2024 periods resulted from:

(a) its field services division due to greater turnaround project demand, including scope growth on certain projects, and (b) its shop services division due to greater new build heat exchanger sales.

Our United Kingdom building services segment revenues were $106.6 million and $211.3 million for the three and six months ended June 30, 2024, respectively, compared to revenues of $106.0 million and $216.9 million for the three and six months ended June 30, 2023, respectively.

The decrease in this segment’s revenues for the six months ended June 30, 2024 was a result of:

(a) a reduction in project activity, notably within the network and communications market sector, and (b) the loss of certain facilities maintenance contracts not renewed pursuant to rebid.

Revenues of this segment for the three and six months ended June 30, 2024 were positively impacted by $0.9 million and $5.2 million, respectively, as a result of favorable exchange rate movements for the British pound versus the United States dollar.

Offsetting this revenue growth in both 2024 periods were declines in revenues within this segment’s commercial site-based services and government site-based services divisions due to the loss of certain facilities maintenance contracts not renewed pursuant to rebid.

Revenues of our United States industrial services segment for the three months ended September 30, 2024 were $286.4 million, compared to revenues of $252.1 million for the three months ended September 30, 2023.

Revenues of this segment for the nine months ended September 30, 2024 were $964.5 million, compared to revenues of $875.3 million for the nine months ended September 30, 2023.

This segment’s results for the three and nine months ended September 30, 2024 included $17.4 million and $29.1 million, respectively, of incremental revenues from an acquired company.

Excluding such acquisition contribution, the increase in this segment’s revenues for both 2024 periods resulted from its field services division due to greater demand, including turnarounds of a larger size and scope growth on certain projects.

Our United Kingdom building services segment revenues were $106.4 million and $317.6 million for the three and nine months ended September 30, 2024, respectively, compared to revenues of $110.7 million and $327.6 million for the three and nine months ended September 30, 2023, respectively.

The decrease in this segment’s revenues for both 2024 periods was primarily a result of the loss of certain facilities maintenance contracts not renewed pursuant to rebid.

Revenues of this segment for the three and nine months ended September 30, 2024 were positively impacted by $2.8 million and $8.0 million, respectively, as a result of favorable exchange rate movements for the British pound versus the United States dollar.

Cost of sales and gross profit

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For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

2024 2023 2024 2023

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Gross profit margin 19.9 % 17.0 % 18.6 % 16.1 %

Our gross profit for the three months ended June 30, 2024 was $684.0 million, or 18.7% of revenues, compared to gross profit of $490.1 million, or 16.1% of revenues, for the three months ended June 30, 2023.

Gross profit for the six months ended June 30, 2024 was $1,273.3 million, or 17.9% of revenues, compared to gross profit of $926.1 million, or 15.6% of revenues, for the six months ended June 30, 2023.

The increase in gross profit and the expansion in gross profit margin for both 2024 periods were the result of stronger operating performance across each of our domestic reportable segments due to an improved revenue mix, excellent project execution, and/or favorable pricing.

Our gross profit for the three and six months ended June 30, 2024 included incremental acquisition contribution of $14.8 million and $16.5 million, respectively, net of amortization expense attributable to identifiable intangible assets of $3.0 million in each period.

Refer to the operating income section below for further discussion regarding the operating performance of each of our reportable segments.

Our gross profit for the three months ended September 30, 2024 was $734.7 million, or 19.9% of revenues, compared to gross profit of $545.5 million, or 17.0% of revenues, for the three months ended September 30, 2023.

Gross profit for the nine months ended September 30, 2024 was $2,008.0 million, or 18.6% of revenues, compared to gross profit of $1,471.6 million, or 16.1% of revenues, for the nine months ended September 30, 2023.

The increase in gross profit and the expansion in gross profit margin for both 2024 periods were driven by each of our domestic reportable segments due to an improved revenue mix, excellent project execution, and/or favorable pricing.

Our gross profit for the three and nine months ended September 30, 2024 included incremental acquisition contribution of $15.6 million and $32.2 million, respectively, net of amortization expense attributable to identifiable intangible assets of $2.9 million and $5.9 million, respectively.

Selling, general and administrative expenses

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For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

2024 2023 2024 2023

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SG&A margin 10.0 % 9.6 % 9.7 % 9.7 %

Our selling, general and administrative expenses for the three months ended June 30, 2024 were $351.2 million, or 9.6% of revenues, compared to selling, general and administrative expenses of $293.4 million, or 9.6% of revenues, for the three months ended June 30, 2023.

Selling, general and administrative expenses for the six months ended June 30, 2024 were $680.5 million, or 9.6% of revenues, compared to selling, general and administrative expenses of $574.5 million, or 9.7% of revenues, for the six months ended June 30, 2023.

Selling, general and administrative expenses for the three and six months ended June 30, 2024 included $10.2 million and $13.1 million, respectively, of incremental expenses directly related to companies acquired in 2024 and 2023, including amortization expense attributable to identifiable intangible assets of $2.0 million and $3.1 million, respectively.

Our selling, general and administrative expenses for the three months ended September 30, 2024 were $371.2 million, or 10.0% of revenues, compared to selling, general and administrative expenses of $308.1 million, or 9.6% of revenues, for the three months ended September 30, 2023.

Selling, general and administrative expenses for the nine months ended September 30, 2024 were $1,051.7 million, or 9.7% of revenues, compared to selling, general and administrative expenses of $882.7 million, or 9.7% of revenues, for the nine months ended September 30, 2023.

Selling, general and administrative expenses for the three and nine months ended September 30, 2024 included $10.2 million and $23.3 million, respectively, of incremental expenses directly related to companies acquired in 2024 and 2023, including amortization expense attributable to identifiable intangible assets of $1.7 million and $4.8 million, respectively.

Excluding incremental expenses from businesses acquired, the increase in selling, general and administrative expenses for both 2024 periods was predominantly attributable to greater:

(a) salaries and related employment expenses, largely as a result of additional headcount to support our organic revenue growth as well as annual cost of living adjustments, and (b) incentive compensation expense across the majority of our reportable segments, due to higher projected annual operating results.

In addition, the increase in selling, general and administrative expenses for the six months ended June 30, 2024 was partially a result of an increase in the provision for credit losses, primarily due to a reserve taken in the first quarter of 2024 for a specific customer bankruptcy within our United States building services segment.

(a) salaries and related employment expenses, largely as a result of additional headcount to support our organic revenue growth as well as annual cost of living adjustments, and (b) incentive compensation expense across our reportable segments, due to higher projected annual operating results.

While our SG&A margin for the nine months ended September 30, 2024 was consistent with that for the nine months ended September 30, 2023, our SG&A margin for the three months ended September 30, 2024 increased by 40 basis points when compared to that for the three months ended September 30, 2023.

This increase in quarterly SG&A margin was primarily a result of the true-up of our operating company incentive compensation accruals given the strong performance during the quarter, as evidenced in part by the increase in gross profit margin referenced above.

Operating income (loss)

The following tables present our operating income (loss) and operating income (loss) as a percentage of segment revenues (“operating margin”) (in thousands, except for percentages):

For the three months ended June 30,

For the three months ended September 30,

Revenues 2023 % of

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Corporate administration (34,762) — (30,121) —

Impairment loss on long-lived assets — — (2,350) —

Total operations 363,538 9.8 % 234,983 7.3 %

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Interest income (expense), net 8,312 (90)

6,106 (2,692)

Income before income taxes $ 372,077 $ 234,609

For the six months ended June 30,

For the nine months ended September 30,

Revenues 2023 % of

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Corporate administration (108,491) — (93,901) —

Impairment loss on long-lived assets — — (2,350) —

Total operations 956,299 8.9 % 586,560 6.4 %

1 unchanged sentence

Interest income (expense), net 21,959 (4,614)

13,647 (4,524)

Income before income taxes $ 978,928 $ 581,106

Operating income for the three months ended June 30, 2024 was $332.8 million, an increase of $136.1 million compared to operating income of $196.7 million for the three months ended June 30, 2023.

Operating margin for the three months ended June 30, 2024 was 9.1% compared to an operating margin of 6.5% for the three months ended June 30, 2023.

For the six months ended June 30, 2024, operating income was $592.8 million, an increase of $241.2 million compared to operating income of $351.6 million for the six months ended June 30, 2023.

Operating margin for the six months ended June 30, 2024 was 8.3% compared to an operating margin of 5.9% for the six months ended June 30, 2023.

Operating income for the three months ended September 30, 2024 was $363.5 million, an increase of $128.6 million compared to operating income of $235.0 million for the three months ended September 30, 2023.

Operating margin for the three months ended September 30, 2024 was 9.8% compared to an operating margin of 7.3% for the three months ended September 30, 2023.

For the nine months ended September 30, 2024, operating income was $956.3 million, an increase of $369.7 million compared to operating income of $586.6 million for the nine months ended September 30, 2023.

Operating margin for the nine months ended September 30, 2024 was 8.9% compared to an operating margin of 6.4% for the nine months ended September 30, 2023.

As described in more detail below, these increases in profitability were predominantly a result of improved operating performance within our United States construction segments, due to a more favorable mix of work and better project execution, including enhanced productivity, due in part to investments in virtual design and construction, prefabrication, and automation.

Operating income for the three and six months ended June 30, 2024 included incremental acquisition contribution of $4.6 million and $3.4 million, respectively, net of amortization expense attributable to identifiable intangible assets of $5.0 million and $6.1 million, respectively.

Operating income of our United States electrical construction and facilities services segment was $88.6 million, or 11.1% of revenues, for the three months ended June 30, 2024, compared to $50.7 million, or 7.5% of revenues, for the three months ended June 30, 2023.

Operating income of this segment for the six months ended June 30, 2024 was $180.2 million, or 11.5% of revenues, compared to $91.2 million, or 6.9% of revenues, for the six months ended June 30, 2023.

Operating income for the three and nine months ended September 30, 2024 included incremental acquisition contribution of $5.5 million and $8.9 million, respectively, net of amortization expense attributable to identifiable intangible assets of $4.6 million and $10.7 million, respectively.

Operating income of our United States electrical construction and facilities services segment was $119.1 million, or 14.1% of revenues, for the three months ended September 30, 2024, compared to $63.1 million, or 9.1% of revenues, for the three months ended September 30, 2023.

Operating income of this segment for the nine months ended September 30, 2024 was $299.3 million, or 12.4% of revenues, compared to $154.4 million, or 7.6% of revenues, for the nine months ended September 30, 2023.

The increases in operating income and operating margin of this segment for both 2024 periods were a result of greater gross profit and gross profit margin from projects within the majority of the market sectors in which we operate, due to both an increase in revenues as well as a more favorable mix of work.

While the most significant increase in gross profit was experienced within the network and communications market sector, this segment additionally benefited from greater gross profit recognized on projects within the transportation, institutional, high-tech manufacturing, and manufacturing and industrial market sectors.

Our United States mechanical construction and facilities services segment’s operating income for the three months ended June 30, 2024 was $213.4 million, or 12.9% of revenues, compared to operating income of $119.8 million, or 10.0% of revenues, for the three months ended June 30, 2023.

Operating income of this segment for the six months ended June 30, 2024 was $364.2 million, or 11.8% of revenues, compared to $206.1 million, or 9.1% of revenues, for the six months ended June 30, 2023.

This segment’s operating income for the three and six months ended June 30, 2024 included incremental acquisition contribution of $4.8 million, net of amortization expense attributable to identifiable intangible assets of $3.4 million.

While the most significant increase in gross profit was experienced within the network and communications market sector, this segment additionally benefited from greater gross profit recognized on projects within the institutional, manufacturing and industrial, and high-tech manufacturing market sectors.

Our United States mechanical construction and facilities services segment’s operating income for the three months ended September 30, 2024 was $214.8 million, or 12.9% of revenues, compared to operating income of $138.5 million, or 10.4% of revenues, for the three months ended September 30, 2023.

Operating income of this segment for the nine months ended September 30, 2024 was $579.0 million, or 12.2% of revenues, compared to $344.6 million, or 9.6% of revenues, for the nine months ended September 30, 2023.

This segment’s operating income for the three and nine months ended September 30, 2024 included incremental acquisition contribution of $4.9 million and $9.6 million, respectively, net of amortization expense attributable to identifiable intangible assets of $3.4 million and $6.9 million, respectively.

Excluding the impact of acquisitions, the increases in operating income and operating margin of this segment for both 2024 periods were primarily a result of contribution from projects within:

(a) the high-tech manufacturing market sector, including certain mechanical construction or fire protection projects for customers engaged in either the design or manufacturing of semiconductors or the production and development of electric vehicles and/or lithium batteries, (b) the network and communications market sector, and (c) the commercial market sector, including various fire protection projects.

While the most significant increases in gross profit were seen within the above referenced market sectors, this segment also experienced increases in gross profit within the majority of the other market sectors in which we operate.

In addition to the increases in gross profit margin referenced above, operating margin of our United States mechanical construction and facilities services segment for both 2024 periods benefited from a reduction in the ratio of selling, general and administrative expenses to revenues given an increase in revenues without a commensurate increase in certain overhead costs.

Operating income of our United States building services segment was $46.8 million, or 6.0% of revenues, for the three months ended June 30, 2024 compared to $46.1 million, or 6.0% of revenues, for the three months ended June 30, 2023.

Operating income of this segment for the six months ended June 30, 2024 was $80.3 million, or 5.1% of revenues, compared to $83.8 million, or 5.6% of revenues, for the six months ended June 30, 2023.

For both 2024 periods, increased gross profit and gross profit margin from this segment’s mechanical services division, due to greater profitability across the majority if its service lines, was partially offset by reductions in gross profit and gross profit margin from its commercial site-based services and government site-based services divisions, given the loss of certain facilities maintenance contracts not renewed pursuant to rebid.

Operating income and operating margin for the six months ended June 30, 2024 were negatively impacted by an $11.0 million reserve recorded during the first quarter of 2024 for a specific customer bankruptcy within this segment’s commercial site-based services division.

Such reserve negatively impacted the operating margin of this segment for the first half of 2024 by 70 basis points.

Our United States industrial services segment reported operating income of $12.7 million, or 3.9% of revenues, for the three months ended June 30, 2024, compared to operating income of $7.9 million, or 2.7% of revenues, for the three months ended June 30, 2023.

For the six months ended June 30, 2024, this segment reported operating income of $30.7 million, or 4.5% of revenues, compared to operating income of $22.9 million, or 3.7% of revenues, for the six months ended June 30, 2023.

Operating income and operating margin of this segment for both 2024 periods benefited from an improvement in gross profit margin, primarily within the shop services division, largely due to favorable pricing and greater indirect cost absorption.

Operating income of our United Kingdom building services segment was $5.8 million, or 5.4% of revenues, for the three months ended June 30, 2024, compared to $5.9 million, or 5.6% of revenues, for the three months ended June 30, 2023.

Operating income for the six months ended June 30, 2024 was $11.2 million, or 5.3% of revenues, compared to $11.4 million, or 5.2% of revenues, for the six months ended June 30, 2023.

Despite a difficult operating environment within the United Kingdom, we continue to optimize our project and service mix while seeking to effectively leverage the overhead cost structure of this segment, resulting in operating performance which is relatively consistent with that of the prior year period.

Our corporate administration expenses for the three months ended June 30, 2024 of $34.6 million were generally consistent with the $33.9 million reported for the three months ended June 30, 2023.

For the six months ended June 30, 2024, our corporate administrative expenses were $73.7 million, compared to $63.8 million for the six months ended June 30, 2023.

The increase in corporate expenses for the first six months of 2024 was primarily due to greater employment compensation costs, including certain severance expenses recorded during the first quarter of 2024 as well as an increase in share-based compensation expense.

In addition, we experienced an increase in computer hardware and software costs, due to various information technology and cybersecurity initiatives currently in process.

As a result of an increase in our average daily invested cash balance, coupled with the repayment, in December of 2023, of all previously outstanding borrowings under our credit facility, we generated net interest income for the three and six months ended June 30, 2024 of $6.1 million and $13.6 million, respectively, compared to net interest expense of $2.7 million and $4.5 million for the three and six months ended June 30, 2023, respectively.

For the three and six months ended June 30, 2024, our income tax provision was $91.6 million and $162.1 million, respectively, compared to an income tax provision of $53.1 million and $94.4 million for the three and six months ended June 30, 2023, respectively.

Our effective income tax rate for the three and six months ended June 30, 2024 was 27.0% and 26.7%, respectively, compared to an effective income tax rate for the three and six months ended June 30, 2023 of 27.4% and 27.3%, respectively.

(a) the high-tech manufacturing market sector, including certain mechanical construction or fire protection projects for customers engaged in either the design or manufacturing of semiconductors or the production and development of electric vehicles and/or lithium batteries, and (b) the network and communications market sector.

Operating income of our United States building services segment was $55.6 million, or 7.0% of revenues, for the three months ended September 30, 2024 compared to $57.2 million, or 7.0% of revenues, for the three months ended September 30, 2023.

Operating income of this segment for the nine months ended September 30, 2024 was $135.9 million, or 5.8% of revenues, compared to $140.9 million, or 6.1% of revenues, for the nine months ended September 30, 2023.

For both 2024 periods, increased gross profit from this segment’s mechanical services division, due primarily to greater profitability across its portfolio of HVAC and building automation and controls projects and retrofits, was partially offset by reductions in gross profit from its commercial site-based services and government site-based services divisions, given the loss of certain facilities maintenance contracts not renewed pursuant to rebid.

Operating income and operating margin for the nine months ended September 30, 2024 were negatively impacted by an $11.0 million reserve recorded during the first quarter of 2024 for a specific customer bankruptcy within this segment’s commercial site-based services division.

Such reserve negatively impacted the operating margin of this segment for the first nine months of 2024 by approximately 40 basis points.

Our United States industrial services segment reported operating income of $3.3 million, or 1.1% of revenues, for the three months ended September 30, 2024, compared to an operating loss of $0.2 million, or (0.1)% of revenues, for the three months ended September 30, 2023.

For the nine months ended September 30, 2024, this segment reported operating income of $34.0 million, or 3.5% of revenues, compared to operating income of $22.7 million, or 2.6% of revenues, for the nine months ended September 30, 2023.

Operating income and operating margin of this segment for both 2024 periods benefited from an improvement in gross profit margin within each of its field services and shop services divisions, largely due to favorable pricing and greater indirect cost absorption.

Operating income of our United Kingdom building services segment was $5.5 million, or 5.2% of revenues, for the three months ended September 30, 2024, compared to $8.9 million, or 8.0% of revenues, for the three months ended September 30, 2023.

Operating income for the nine months ended September 30, 2024 was $16.7 million, or 5.2% of revenues, compared to $20.2 million, or 6.2% of revenues, for the nine months ended September 30, 2023.

The decrease in operating income and operating margin for both 2024 periods was due to a decline in gross profit and gross profit margin.

In addition to the impact of lower revenues, gross profit and gross profit margin were negatively affected by a less favorable mix of work when compared to the prior year periods, which included a greater number of higher margin projects.

Our corporate administration expenses for the three months ended September 30, 2024 were $34.8 million, compared to $30.1 million for the three months ended September 30, 2023.

For the nine months ended September 30, 2024, our corporate administration expenses were $108.5 million, compared to $93.9 million for the nine months ended September 30, 2023.

The increase in corporate expenses for both 2024 periods was primarily due to greater:

(a) employment compensation costs, including salaries, incentive compensation, and share-based compensation, and (b) computer hardware and software costs, due to various information technology and cybersecurity initiatives currently in process.

Partially contributing to the increase in corporate expenses for the first nine months of 2024 were certain severance expenses which were recorded during the first quarter of the year.

As a result of an increase in our average daily invested cash balance, coupled with the repayment, in December of 2023, of all previously outstanding borrowings under our credit facility, we generated net interest income for the three and nine months ended September 30, 2024 of $8.3 million and $22.0 million, respectively, compared to net interest expense of $0.1 million and $4.6 million for the three and nine months ended September 30, 2023, respectively.

For the three and nine months ended September 30, 2024, our income tax provision was $101.8 million and $263.9 million, respectively, compared to an income tax provision of $64.9 million and $159.3 million for the three and nine months ended September 30, 2023, respectively.

Our effective income tax rate for the three and nine months ended September 30, 2024 was 27.4% and 27.0%, respectively, compared to an effective income tax rate for the three and nine months ended September 30, 2023 of 27.7% and 27.4%, respectively.

Refer to Note 9 - Income Taxes of the notes to consolidated financial statements for further discussion regarding our income tax provision and effective income tax rate.

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The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentage of total remaining performance obligations (in thousands, except for percentages):

% of Total December 31, 2023 % of Total June 30,

September 30,

2024 % of Total December 31, 2023 % of Total September 30,

2023 % of Total

Remaining performance obligations:

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Total operations $ 9,789,452 100 % $ 8,847,421 100 % $ 8,635,443 100 %

Our remaining performance obligations at June 30, 2024 were approximately $9.0 billion compared to approximately $8.8 billion at December 31, 2023 and approximately $8.3 billion at June 30, 2023.

The increase in remaining performance obligations at June 30, 2024, when compared to December 31, 2023, was attributable to an increase in remaining performance obligations within:

(a) our United States electrical construction and facilities services segment, largely as a result of the award of several construction contracts within the institutional and healthcare market sectors, (b) our United States building services segment, primarily due to increased project opportunities across its mechanical services division, and (c) our United Kingdom building services segment given an increase in maintenance and project work within the manufacturing and industrial market sector.

These increases in remaining performance obligations were partially offset by decreases within:

(x) our United States mechanical construction and facilities services segment due to the significant organic revenue growth experienced during the first half of 2024,particularly within the high-tech manufacturing market sector, as well as the timing of the release of certain projects which are currently being pursued, and (y) our United States industrial services segment due to the completion and/or shipment of several new build heat exchangers at the end of the second quarter of 2024.

Remaining performance obligations increased by $221.0 million as a result of acquisitions made by us during 2024.

Our remaining performance obligations at September 30, 2024 were approximately $9.79 billion compared to approximately $8.85 billion at December 31, 2023 and approximately $8.64 billion at September 30, 2023.

When compared to December 31, 2023, remaining performance obligations at September 30, 2024 increased within all of our reportable segments, with the exception of our United States industrial services segment, which experienced a modest decline.

Specifically, we saw increases within:

(a) our United States electrical construction and facilities services segment, largely as a result of the award of several construction contracts within the network and communications, institutional, and healthcare market sectors, (b) our United States mechanical construction and facilities services segment, which experienced increases in remaining performance obligations across the majority of the market sectors in which we operate, with the most notable project awards in the network and communications, healthcare, hospitality and entertainment, water and wastewater, and manufacturing and industrial market sectors, (c) our United States building services segment, primarily due to increased project opportunities across its mechanical services division, and (d) our United Kingdom building services segment, given new facilities maintenance contracts and an increase in project awards.

Remaining performance obligations at September 30, 2024 increased by $222.4 million as a result of acquisitions made by us during 2024.

Partially offsetting these increases was a decrease in remaining performance obligations within the high-tech manufacturing market sector as a result of progress made on certain projects within our United States mechanical construction and facilities services segment.

See Note 3 - Revenue from Contracts with Customers of the notes to consolidated financial statements for further disclosure regarding our remaining performance obligations.

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While we strive to negotiate favorable billing terms, which allow us to invoice in advance of costs incurred on certain of our contracts, there can be no assurance that such terms will be agreed to by our customers.

As of June 30, 2024, we had cash and cash equivalents, excluding restricted cash, of $807.3 million, which are maintained in depository accounts and highly liquid investments with original maturity dates of three months or less.

As of September 30, 2024, we had cash and cash equivalents, excluding restricted cash, of $1,035.5 million, which are maintained in depository accounts and highly liquid investments with original maturity dates of three months or less.

Both our short-term and long-term liquidity requirements are expected to be met through our cash and cash equivalent balances, cash generated from our operations, and, as necessary, the borrowing capacity under our revolving credit facility.

Our credit agreement provides for a $1.30 billion revolving credit facility, for which there was $1.23 billion of available capacity as of June 30, 2024.

Our credit agreement provides for a $1.30 billion revolving credit facility, for which there was $1.23 billion of available capacity as of September 30, 2024.

Refer to Note 7 - Debt of the notes to consolidated financial statements for further information regarding our credit agreement.

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The following table presents a summary of our operating, investing, and financing cash flows (in thousands):

For the six months ended

For the nine months ended

September 30,

Net cash provided by operating activities $ 938,402 $ 475,897

$ 411,958 $ 214,932

Net cash used in investing activities $ (243,687) $ (134,032)

Net cash used in financing activities $ (455,032) $ (276,157)

$ (181,444) $ (126,370)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash $ 7,377 $ 856

Increase in cash, cash equivalents, and restricted cash $ 247,060 $ 66,564

$ 18,448 $ 45,984

During the six months ended June 30, 2024, our cash balance, including cash equivalents and restricted cash, increased by approximately $18.4 million from $789.8 million at December 31, 2023 to $808.2 million at June 30, 2024.

Changes in our cash position from December 31, 2023 to June 30, 2024 are described in further detail below.

During the nine months ended September 30, 2024, our cash balance, including cash equivalents and restricted cash, increased by approximately $247.1 million from $789.8 million at December 31, 2023 to $1,036.8 million at September 30, 2024.

Changes in our cash position from December 31, 2023 to September 30, 2024 are described in further detail below.

Operating Activities – Operating cash flows generally represent our net income as adjusted for certain non-cash items and changes in assets and liabilities.

Net cash provided by operating activities for the six months ended June 30, 2024 was approximately $412.0 million compared to approximately $214.9 million for the six months ended June 30, 2023.

The favorable operating cash flow performance period-over-period was almost entirely a result of our improved operating performance and the corresponding increase in our net income.

Net cash provided by operating activities for the nine months ended September 30, 2024 was approximately $938.4 million compared to approximately $475.9 million for the nine months ended September 30, 2023.

The favorable operating cash flow performance period-over-period was primarily a result of:

(a) our improved operating performance and the corresponding increase in our net income and (b) the timing of cash receipts from our customers.

Investing Activities – Investing cash flows consist primarily of payments for acquisition of businesses, capital expenditures, and proceeds from the sale or disposal of property, plant, and equipment.

Net cash used in investing activities for the six months ended June 30, 2024 increased by approximately $162.7 million compared to the six months ended June 30, 2023, primarily due to an increase in payments for acquisitions.

Net cash used in investing activities for the nine months ended September 30, 2024 increased by approximately $109.7 million compared to the nine months ended September 30, 2023, primarily due to an increase in payments for acquisitions.

Financing Activities – Financing cash flows consist primarily of the issuance and repayment of short-term and long-term debt, repurchases of common stock, payments of dividends to stockholders, and the issuance of common stock through certain equity plans.

Net cash used in financing activities for the six months ended June 30, 2024 was $181.4 million compared to net cash used in financing activities for the six months ended June 30, 2023 of $126.4 million.

The $55.1 million variance was primarily due to an increase in common stock repurchases made by us during the first half of 2024.

Net cash used in financing activities for the nine months ended September 30, 2024 was $455.0 million compared to net cash used in financing activities for the nine months ended September 30, 2023 of $276.2 million.

The $178.9 million variance was primarily due to an increase in common stock repurchases made by us during the first nine months of 2024, partially offset by the impact of repayments on our outstanding debt in the prior year period.

The timing of common stock repurchases is at management’s discretion subject to securities laws and other legal requirements and depends upon several factors, including market and business conditions, current and anticipated future liquidity, share price, and share availability, among others.

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We currently pay a regular quarterly dividend of $0.25 per share.

For the six months ended June 30, 2024 and 2023, cash payments related to dividends were $20.2 million and $15.7 million, respectively.

For the nine months ended September 30, 2024 and 2023, cash payments related to dividends were $31.9 million and $24.2 million, respectively.

Our credit agreement places limitations on the payment of dividends on our common stock.

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Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash – We are exposed to fluctuations in foreign currency exchange rates, almost entirely with respect to the British pound.

Therefore, the $6.8 million variance between the six months ended June 30, 2024 and 2023 was a direct result of exchange rate movements for the British pound versus the United States dollar.

Therefore, the $6.5 million variance between the nine months ended September 30, 2024 and 2023 was a direct result of exchange rate movements for the British pound versus the United States dollar.

Material Cash Requirements from Contractual and Other Obligations

As of June 30, 2024, our short-term and long-term material cash requirements for known contractual and other obligations were as follows:

Outstanding Debt and Interest Payments – As of June 30, 2024, there were no direct borrowings outstanding under our revolving credit facility.

As of September 30, 2024, our short-term and long-term material cash requirements for known contractual and other obligations were as follows:

Outstanding Debt and Interest Payments – As of September 30, 2024, there were no direct borrowings outstanding under our revolving credit facility.

Interest payments on any future borrowings will be determined based on prevailing interest rates at that time.

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Operating and Finance Leases – In the normal course of business, we lease real estate, vehicles, and equipment under various arrangements which are classified as either operating or finance leases.

Future payments for such leases, excluding leases with initial terms of one year or less, were $410.4 million at June 30, 2024, with $94.7 million payable within the next 12 months.

Open Purchase Obligations – As of June 30, 2024, we had $2.32 billion of open purchase obligations, of which payments totaling approximately $1.93 billion are expected to become due within the next 12 months.

Future payments for such leases, excluding leases with initial terms of one year or less, were $398.0 million at September 30, 2024, with $95.7 million payable within the next 12 months.

Open Purchase Obligations – As of September 30, 2024, we had $2.33 billion of open purchase obligations, of which payments totaling approximately $1.92 billion are expected to become due within the next 12 months.

These obligations represent open purchase orders to suppliers and subcontractors related to our construction and services contracts.

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Insurance Obligations – As described in further detail in Note 12 - Commitments and Contingencies of the notes to consolidated financial statements, we have loss payment deductibles and/or self-insured retentions for certain insurance matters.

As of June 30, 2024, our insurance liabilities, net of estimated recoveries, were $227.4 million.

As of September 30, 2024, our insurance liabilities, net of estimated recoveries, were $231.7 million.

Of this net amount, approximately $41.3 million is estimated to be payable within the next 12 months.

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The aggregate amount of these liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, changes in the fair value of amounts owed based on performance during such post-acquisition periods, and accretion in present value.

As of June 30, 2024, the present value of expected future payments relating to these contingent consideration arrangements was $27.2 million.

As of September 30, 2024, the present value of expected future payments relating to these contingent consideration arrangements was $26.3 million.

Of this amount, $18.3 million is estimated as being payable within the next 12 months, with the remainder due pursuant to the terms of our contractual agreements, some of which extend into 2027.

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Amounts of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated.

Refer to Note 14 - Retirement Plans of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data of our Form 10-K for the year ended December 31, 2023 for more information regarding multiemployer benefit plans.

Off-Balance Sheet Arrangements and Other Commercial Commitments

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We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf.

As of June 30, 2024, based on the percentage-of-completion of our projects covered by surety bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $2.1 billion, which represents approximately 23% of our total remaining performance obligations.

As of September 30, 2024, based on the percentage-of-completion of our projects covered by surety bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $2.4 billion, which represents approximately 25% of our total remaining performance obligations.

Surety bonds expire at various times ranging from final completion of a project to a period extending beyond contract completion in certain circumstances.

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In addition, surety bonds or letters of credit may be issued as collateral for certain insurance obligations.

As of June 30, 2024, we satisfied approximately $48.1 million and $71.1 million of the collateral requirements of our insurance programs by utilizing surety bonds and letters of credit, respectively.

As of September 30, 2024, we satisfied approximately $48.1 million and $71.1 million of the collateral requirements of our insurance programs by utilizing surety bonds and letters of credit, respectively.

All such letters of credit were issued under our revolving credit facility, therefore reducing the available capacity of such facility.

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The preparation of our consolidated financial statements is based on the application of significant accounting policies, which require management to make estimates and assumptions.

Our significant accounting policies are described further in Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8 of our Form 10-K for the year ended December 31, 2023.

Our significant accounting policies are described further in Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data of our Form 10-K for the year ended December 31, 2023.

We base our estimates on historical experience, known or expected trends, third-party valuations, and various other assumptions that we believe to be reasonable under the circumstances.

As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

There have been no significant changes to our critical accounting policies or methods during the six months ended June 30, 2024.

There have been no significant changes to our critical accounting policies or methods during the nine months ended September 30, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis