What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-30 compared with 2024-10-31 · 127 added, 172 removed, 151 unchanged (66% of the section changed)

12 unchanged sentences

Business of our Form 10-K for the year ended December 31, 2024.

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):

The following table presents selected financial data for the quarters ended March 31, 2025 and 2024 (in thousands, except for percentages and per share data):

For the three months ended

September 30,

Revenues $ 3,867,372 $ 3,432,276

4 unchanged sentences

Operating income as a percentage of revenues 8.2 % 7.6 %

Net income attributable to EMCOR Group, Inc.

$ 240,677 $ 197,149

Diluted earnings per common share $ 5.26 $ 4.17

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.

Revenues of $3.87 billion for the quarter ended March 31, 2025 set a new quarterly record for the Company and represent an increase of 12.7% from revenues of $3.43 billion for the quarter ended March 31, 2024.

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 all of our reportable segments, except for our United States building services segment.

Revenues for the first quarter of 2025 included incremental acquisition contribution of approximately $250.9 million.

Operating income for the quarter ended March 31, 2025 was $318.8 million, or 8.2% of revenues, establishing new records for the Company with respect to a first quarter.

This compares to operating income of $260.0 million, or 7.6% of revenues, for the quarter ended March 31, 2024.

The $58.8 million increase in operating income, and corresponding 60 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 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.

Operating income for the quarter ended March 31, 2025 included incremental acquisition contribution of $14.2 million, net of amortization expense attributable to identifiable intangible assets of $10.5 million.

Net income of $240.7 million, or $5.26 per diluted share, for the quarter ended March 31, 2025 compares favorably to net income of $197.1 million, or $4.17 per diluted share, for the quarter ended March 31, 2024.

While the majority of the increase in our net income and diluted earnings per share was a result of the increased operating income referenced above, diluted earnings per share for the quarter ended March 31, 2025 additionally benefited from a reduced weighted average share count given the impact of common stock repurchases made by us throughout 2024 and the first quarter of 2025.

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

During the first quarter of 2025, we completed the acquisition of Miller Electric Company (“Miller Electric”), a leading electrical contractor predominantly operating across the Southeastern United States.

The results of operations for Miller Electric have been included within our United States electrical construction and facilities services segment.

In addition to Miller Electric, we acquired a company which provides building automation controls and solutions to commercial, institutional, and industrial customers.

Although de minimis, the results of operations for such acquisition have been included within our United States mechanical construction and facilities services segment.

We acquired seven companies during calendar year 2024 for upfront consideration of $231.1 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) two companies that have been included in our United States building services segment, including:

(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.

Such acquisitions include:

(a) a national energy efficiency specialty services firm, the results of operations of which have been included in our United States building services segment, and (b) seven companies, the results of operations of which were de minimis, consisting of:

(i) three companies that have been included within our United States mechanical construction and facilities services segment, one of which provides mechanical and pipe fabrication services in the Midwestern region of the United States, and two of which add capabilities to our national fire protection services, and (ii) four mechanical services companies in the Western and Midwestern regions of the United States that have been included within our United States building services segment and enhance our presence in geographies where we have existing operations.

(a) an electrical contractor in the Southeast region of the United States, that has been included in our United States electrical construction and facilities services segment, (b) 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, (c) three companies that have been included in our United States building services segment, including:

(i) a provider of building automation and controls solutions in the Northeast region of the United States, (ii) a mechanical services company in the Western region of the United States, and (iii) a mechanical services company in the Eastern region of the United States, and (d) 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.

Results of Operations

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 September 30,

Total 2023 % of

United States electrical construction and facilities services $ 845,030 23 % $ 697,406 22 %

United States mechanical construction and facilities services 1,662,211 45 % 1,329,600 41 %

United States building services 796,923 21 % 817,718 26 %

United States industrial services 286,410 8 % 252,148 8 %

Total United States operations 3,590,574 97 % 3,096,872 97 %

United Kingdom building services 106,350 3 % 110,726 3 %

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

For the nine months ended September 30,

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

For the three months ended March 31,

Total 2024 % of

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United Kingdom building services 105,301 3 % 104,687 3 %

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

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 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 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.

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 service work.

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 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 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.

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.

Consolidated revenues

$ 3,867,372 100 % $ 3,432,276 100 %

As described in more detail below, due to strong demand for our services across most of the market sectors we serve, our consolidated revenues for the first quarter of 2025 increased to $3.87 billion compared to $3.43 billion for the first quarter of 2024.

While the most significant revenue growth was experienced within our United States construction segments, we generated greater revenues within all of our reportable segments, except for our United States building services segment.

Revenues for the first quarter of 2025 included incremental acquisition contribution of approximately $250.9 million.

Revenues of our United States electrical construction and facilities services segment were $1,087.8 million for the three months ended March 31, 2025, an increase of $323.1 million compared to revenues of $764.7 million for the three months ended March 31, 2024.

This segment’s results included $186.3 million of incremental acquisition revenues, almost entirely from Miller Electric.

From a market sector perspective, increased revenues were generated from all of the sectors we serve, except for the manufacturing and industrial market sector, which experienced a modest decline year-over-year.

While the largest increase in revenues was seen within the network and communications market sector, predominantly driven by greater demand for data center construction projects, this segment additionally experienced notable increases in revenues from:

(a) the healthcare market sector, as a result of greater project activity across several of the geographies in which we operate, (b) the transportation market sector, due to certain infrastructure projects currently underway, and (c) the institutional market sector, given an increase in revenues from certain public sector projects.

Our United States mechanical construction and facilities services segment revenues for the three months ended March 31, 2025 were $1,572.6 million, a $144.9 million increase compared to revenues of $1,427.7 million for the three months ended March 31, 2024.

This segment’s results included $47.3 million of incremental acquisition revenues.

Similar to our United States electrical construction and facilities services segment, this segment generated the most significant increase in revenues from the network and communications market sector due to greater demand for data center construction projects.

In addition to data centers, notable revenue growth was experienced within:

(a) the healthcare market sector, primarily throughout the Southeast region of the United States, inclusive of incremental contribution from acquired companies, (b) the hospitality and entertainment market sector, given increased project activity in the Western region of the United States, and (c) the water and wastewater market sector, driven by several projects within the Southeast region of the United States.

Further contributing to the revenue increase within this segment was a greater level of service volume.

These increases were partially offset by revenue declines from:

(a) the commercial market sector, as a result of:

(i) fewer active warehousing and distribution projects for certain of our e-commerce customers and (ii) the completion or substantial completion of certain tenant fit-out or office projects, and (b) the high-tech manufacturing market sector as we work towards completion of the initial phases of certain semiconductor manufacturing construction projects.

Revenues of our United States building services segment for the three months ended March 31, 2025 were $742.6 million compared to revenues of $781.2 million for the three months ended March 31, 2024.

Excluding incremental acquisition contribution of $2.6 million, this segment’s revenues for the three months ended March 31, 2025 decreased by $41.1 million as the strength of its mechanical services division was more than offset by revenue declines within its commercial site-based and government site-based services divisions due to the loss of certain facilities maintenance contracts not renewed pursuant to rebid.

With respect to this segment’s mechanical services division, revenue growth was experienced from:

(a) HVAC project and retrofit work, as demand for these services remained strong, partially as our customers continue to seek ways to improve the energy efficiency 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 March 31, 2025 were $359.0 million, compared to revenues of $354.1 million for the three months ended March 31, 2024.

This segment’s results included $14.7 million of incremental acquisition revenues.

Excluding such acquisition contribution, the reduction in this segment’s revenues resulted primarily from the deferral or delay of planned turnaround projects, partially due to abnormal weather conditions within the Gulf Coast region.

For the three months ended March 31, 2025, our United Kingdom building services segment generated revenues of $105.3 million, a slight increase from the $104.7 million generated during the three months ended March 31, 2024.

A modest reduction in facilities maintenance revenues was more than offset by increased project work largely within the manufacturing and industrial and network and communications market sectors.

Cost of sales and gross profit

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For the three months ended

September 30,

For the nine months ended

September 30,

2024 2023 2024 2023

Cost of sales $ 3,144,654 $ 2,842,967

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Gross profit margin 18.7 % 17.2 %

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.

Our gross profit for the three months ended March 31, 2025 was $722.7 million, or 18.7% of revenues, compared to gross profit of $589.3 million, or 17.2% of revenues, for the three months ended March 31, 2024.

The year-over-year increase in gross profit and the expansion in gross profit margin were driven by both of our United States construction segments, as well as our United States building services segment in each case due to an improved revenue mix and excellent project execution.

Our gross profit for the three months ended March 31, 2025 included incremental acquisition contribution of $41.8 million net of amortization expense attributable to identifiable intangible assets of $5.4 million.

Selling, general and administrative expenses

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For the three months ended

September 30,

For the nine months ended

September 30,

2024 2023 2024 2023

Selling, general and administrative expenses $ 403,962 $ 329,356

SG&A margin 10.4 % 9.6 %

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 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 September 30,

Revenues 2023 % of

Our selling, general and administrative expenses for the three months ended March 31, 2025 were $404.0 million, or 10.4% of revenues, compared to selling, general and administrative expenses of $329.4 million, or 9.6% of revenues, for the three months ended March 31, 2024.

Selling, general and administrative expenses for the three months ended March 31, 2025 included:

(a) $27.5 million of incremental expenses directly related to companies acquired, including amortization expense attributable to identifiable intangible assets of $5.1 million, and (b) $9.4 million of transaction related costs incurred in connection with the acquisition of Miller Electric.

Excluding incremental expenses resulting from acquisitions, our selling, general and administrative expenses increased by $37.7 million, primarily as a result of greater:

(a) salaries and related employment expenses, due to additional headcount to support our organic revenue growth as well as annual cost of living adjustments, (b) incentive compensation expense, predominantly within our United States construction segments, given higher projected annual operating results, and (c) computer hardware and software costs due to various information technology and cybersecurity initiatives currently in process.

These increases were partially offset by a decrease in the provision for credit losses year-over-year.

The 80 basis point year-over-year increase in our SG&A margin was primarily due to:

(a) improved gross profit and gross profit margin, which resulted in the above referenced increase in incentive compensation expense across certain of our operating subsidiaries, (b) a decrease in revenues, without a commensurate decrease in selling, general and administrative expenses, within our United States building services segment, and (c) the impact of the $9.4 million of transaction related costs referenced above.

Operating income (loss)

United States electrical construction and facilities services $ 119,118 14.1 % $ 63,127 9.1 %

United States mechanical construction and facilities services 214,831 12.9 % 138,476 10.4 %

United States building services 55,562 7.0 % 57,156 7.0 %

United States industrial services 3,292 1.1 % (174) (0.1) %

Total United States operations 392,803 10.9 % 258,585 8.3 %

United Kingdom building services 5,497 5.2 % 8,869 8.0 %

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

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

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

Net periodic pension income (cost) 227 (284)

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

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

For the nine months ended September 30,

The following table presents 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 March 31,

Revenues 2024 % of

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Corporate administration (52,218) — (39,158) —

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

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

Net periodic pension income (cost) 670 (840)

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

Consolidated operating income

318,756 8.2 % 259,953 7.6 %

Net periodic pension income

Interest income, net

Income before income taxes $ 324,197 $ 267,716

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.

Operating income for the three months ended March 31, 2025 was $318.8 million, an increase of $58.8 million compared to operating income of $260.0 million for the three months ended March 31, 2024.

Operating margin for the three months ended March 31, 2025 was 8.2% compared to an operating margin of 7.6% for the three months ended March 31, 2024.

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 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 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, and (b) the network and communications market sector.

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, including commercial, institutional, manufacturing and industrial, and healthcare.

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.

Operating income for the three months ended March 31, 2025 included incremental acquisition contribution of $14.2 million net of amortization expense attributable to identifiable intangible assets of $10.5 million.

Operating income of our United States electrical construction and facilities services segment was $136.1 million, or 12.5% of revenues, for the three months ended March 31, 2025, compared to $91.6 million, or 12.0% of revenues, for the three months ended March 31, 2024.

Operating income and operating margin of this segment benefited from greater gross profit and gross profit margin due to an increase in revenues, excellent project execution, and a more favorable mix of work.

While the most significant increase in gross profit was generated within the network and communications market sector, this segment additionally experienced increases within the majority of the other market sectors in which we operate.

Largely driven by Miller Electric, this segment’s operating income included incremental acquisition contribution of $12.0 million, net of amortization expense attributable to identifiable intangible assets of $8.0 million.

Our United States mechanical construction and facilities services segment’s operating income for the three months ended March 31, 2025 was $186.7 million, or 11.9% of revenues, compared to operating income of $150.7 million, or 10.6% of revenues, for the three months ended March 31, 2024.

Similar to our United States electrical construction and facilities services segment, this improved performance was a result of greater gross profit and gross profit margin due to an increase in revenues, excellent project execution, and a more favorable mix of work.

From a market sector perspective, this segment also experienced greater profitability across the majority of the sectors in which we operate, with the most significant increases in gross profit coming from the network and communications and high-tech manufacturing market sectors.

Despite the reduction in high-tech manufacturing revenues referenced above, favorable progression on a number of contracts resulted in greater profitability within the quarter.

This segment’s operating income included incremental acquisition contribution of $2.6 million, net of amortization expense attributable to identifiable intangible assets of $1.6 million.

Partially offsetting these increases was a reduction in gross profit from the commercial market sector, primarily as a result of the reduced revenues previously referenced.

Operating income of our United States building services segment was $36.4 million, or 4.9% of revenues, for the three months ended March 31, 2025 compared to $33.5 million, or 4.3% of revenues, for the three months ended March 31, 2024.

For the first quarter of 2025, this segment experienced an increase in gross profit and gross profit margin from its mechanical services division, due to greater profitability across its portfolio of HVAC retrofits, building automation and controls projects, and repair service work orders.

These increases were partially offset by reductions in gross profit and gross profit margin from the segment’s commercial site-based services and government site-based services divisions given the loss of the previously referenced facilities maintenance contracts.

The results of this segment for the prior year period included an $11.0 million reserve for a specific customer bankruptcy within its commercial site-based services division, which negatively impacted the segment’s operating margin by 140 basis points for the three months ended March 31, 2024.

Our United States industrial services segment reported operating income of $6.8 million, or 1.9% of revenues, for the three months ended March 31, 2025, compared to $18.0 million, or 5.1% of revenues, for the three months ended March 31, 2024.

The decreases in operating income and operating margin of this segment were primarily a result of:

(a) a less favorable revenue mix when compared to the prior year period, which benefited from turnaround projects of a greater size as well as a large renewable fuel project, (b) the impact of the aforementioned project deferrals and delays, which resulted in a greater amount of unabsorbed labor costs, and (c) a $4.0 million increase in the allowance for credit losses, which negatively impacted the operating margin of this segment by 110 basis points.

Operating income of our United Kingdom building services segment was $5.0 million, or 4.7% of revenues, for the three months ended March 31, 2025, compared to $5.4 million, or 5.1% of revenues, for the three months ended March 31, 2024.

The slight decrease in operating income and the reduction in operating margin were due to certain mobilization costs incurred during the first quarter of 2025 as a result of the recent award of a facilities maintenance contract by a new customer.

Our corporate administration expenses for the three months ended March 31, 2025 were $52.2 million, compared to $39.2 million for the three months ended March 31, 2024.

The increase in corporate expenses was primarily due to:

(a) $9.4 million in transaction related costs incurred in connection with the acquisition of Miller Electric, and (b) greater computer hardware and software costs, due to various information technology and cybersecurity initiatives currently in process.

Net interest income for the three months ended March 31, 2025 was $5.4 million compared to net interest income of $7.5 million for the three months ended March 31, 2024.

The year-over-year decrease in net interest income was a result of an increase in interest expense, given the outstanding borrowings under our revolving credit facility during the first quarter of 2025, coupled with a reduction in interest income due to a lower average rate earned on our invested cash.

For the three months ended March 31, 2025, our income tax provision was $83.5 million compared to an income tax provision of $70.6 million for the three months ended March 31, 2024.

Our effective income tax rate for the three months ended March 31, 2025 was 25.8% compared to an effective income tax rate for the three months ended March 31, 2024 of 26.4%.

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):

September 30,

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

2023 % of Total

% of Total December 31, 2024 % of Total March 31,

Remaining performance obligations:

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Total operations $ 11,750,053 100 % $ 10,102,199 100 % $ 9,175,352 100 %

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.

Our remaining performance obligations at March 31, 2025 were approximately $11.75 billion compared to approximately $10.10 billion at December 31, 2024 and approximately $9.18 billion at March 31, 2024.

When compared to December 31, 2024, remaining performance obligations increased by approximately $1.65 billion.

Such increase was driven by the acquisition of Miller Electric, which added approximately $1.0 billion of remaining performance obligations as of March 31, 2025, as well as new contract awards across all of our reportable segments.

From a market sector perspective, the most significant growth was experienced within:

(a) network and communications, largely as a result of several data center construction contracts, (b) healthcare, (c) manufacturing and industrial, including certain food processing construction projects, (d) water and wastewater, and (e) hospitality and entertainment.

Partially offsetting these increases was a decrease in remaining performance obligations within the high-tech manufacturing market sector, primarily as a result of progress made on certain semiconductor construction projects.

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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The following section discusses our principal liquidity and capital resources, as well as our primary liquidity requirements and sources and uses of cash.

We are focused on the efficient conversion of operating income into cash to provide for the Company’s material cash requirements, including working capital needs, investment in our growth strategies through business acquisitions and capital expenditures, satisfaction of contractual commitments, including principal and interest payments on any outstanding indebtedness, and shareholder return through dividend payments and share repurchases.

We strive to maintain a balanced approach to capital allocation in order to achieve growth, deliver value, and minimize risk.

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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 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.

As of March 31, 2025, we had cash and cash equivalents, excluding restricted cash, of $576.7 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 September 30, 2024.

Our credit agreement provides for a $1.30 billion revolving credit facility, for which there was $978.5 million of available capacity as of March 31, 2025.

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 nine months ended

September 30,

For the three months ended

Net cash provided by operating activities $ 108,471 $ 132,264

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Effect of exchange rate changes on cash, cash equivalents, and restricted cash $ 4,869 $ (1,140)

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

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.

(Decrease) increase in cash, cash equivalents, and restricted cash

$ (762,930) $ 52,737

During the three months ended March 31, 2025, our cash balance, including cash equivalents and restricted cash, decreased by approximately $762.9 million from $1,340.4 million at December 31, 2024 to $577.5 million at March 31, 2025.

Changes in our cash position from December 31, 2024 to March 31, 2025 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 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.

Net cash provided by operating activities for the three months ended March 31, 2025 was approximately $108.5 million compared to approximately $132.3 million for the three months ended March 31, 2024.

The decrease in our operating cash flow period-over-period was a result of an increase in working capital, primarily on our construction projects, given the progression on a number of contracts for which we were previously billed ahead.

As we worked through these upfront payments, we saw the expected decrease in operating cash as our cash outflows exceeded our inflows on these projects.

Such decrease was partially offset by an increase in our net income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

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 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.

Net cash used in investing activities for the three months ended March 31, 2025 increased by approximately $856.0 million compared to the three months ended March 31, 2024, predominantly due to the acquisition of Miller Electric.

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 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.

Net cash used in financing activities was $0.8 million for the three months ended March 31, 2025 compared to $58.9 million for the three months ended March 31, 2024.

The $58.1 million variance was primarily due to $250.0 million in borrowings made under our revolving credit facility, partially offset by a $185.8 million increase in common stock repurchases made by us during the first quarter of 2025.

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

For the three months ended March 31, 2025 and 2024, cash payments related to dividends were $11.5 million and $8.5 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 $6.5 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.

Therefore, the $6.0 million variance between the three months ended March 31, 2025 and 2024 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 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.

As of March 31, 2025, 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 March 31, 2025, we had $250.0 million in direct borrowings outstanding under our revolving credit facility.

Future interest payments will be determined based on prevailing interest rates at that time.

Refer to Note 7 - Debt of the notes to consolidated financial statements for further detail of our debt obligations, including our revolving credit facility.

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 $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.

Future payments for such leases, excluding leases with initial terms of one year or less, were $454.3 million at March 31, 2025, with $106.0 million payable within the next 12 months.

Open Purchase Obligations – As of March 31, 2025, we had $2.72 billion of open purchase obligations, of which payments totaling approximately $2.31 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 September 30, 2024, our insurance liabilities, net of estimated recoveries, were $231.7 million.

As of March 31, 2025, our insurance liabilities, net of estimated recoveries, were $247.2 million.

Of this net amount, approximately $57.0 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 September 30, 2024, the present value of expected future payments relating to these contingent consideration arrangements was $26.3 million.

As of March 31, 2025, the present value of expected future payments relating to these contingent consideration arrangements was $28.6 million.

Of this amount, $20.0 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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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 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.

As of March 31, 2025, 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 $2.8 billion, which represents approximately 24% 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 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.

As of March 31, 2025, we satisfied approximately $61.7 million and $71.2 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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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 nine months ended September 30, 2024.

There have been no significant changes to our critical accounting policies or methods during the three months ended March 31, 2025.

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