EMCOR(EME) - 2025 Q2 - Quarterly Report

PART I. - Financial Information Presents EMCOR's Q2 2025 unaudited consolidated financial statements, management's discussion, market risk, and internal controls Item 1. Financial Statements Presents EMCOR's unaudited consolidated financial statements for Q2 2025, detailing balance sheets, income, cash flow, and equity Consolidated Balance Sheets Details EMCOR's financial position, including assets, liabilities, and equity, as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (vs. Dec 31, 2024) | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------------------- | | Assets | | | | | Cash and cash equivalents | $485,988 | $1,339,550 | $(853,562) | | Accounts receivable, net | $4,114,857 | $3,577,537 | $537,320 | | Contract assets | $348,048 | $284,791 | $63,257 | | Total current assets | $5,176,646 | $5,389,189 | $(212,543) | | Property, plant, and equipment, net | $241,947 | $207,489 | $34,458 | | Operating lease right-of-use assets | $392,987 | $316,128 | $76,859 | | Goodwill | $1,351,824 | $1,018,415 | $333,409 | | Identifiable intangible assets, net | $1,082,028 | $648,180 | $433,848 | | Total assets | $8,400,480 | $7,716,473 | $684,007 | | Liabilities | | | | | Accounts payable | $1,117,733 | $937,087 | $180,646 | | Contract liabilities | $2,133,872 | $2,047,540 | $86,332 | | Total current liabilities | $4,394,538 | $4,153,863 | $240,675 | | Borrowings under revolving credit facility | $250,000 | — | $250,000 | | Total liabilities | $5,346,908 | $4,777,779 | $569,129 | | Equity | | | | | Total equity | $3,053,572 | $2,938,694 | $114,878 | Condensed Consolidated Statements of Operations Presents EMCOR's revenues, gross profit, operating income, and net income for the three and six months ended June 30, 2025 and 2024 | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | YoY Change | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | YoY Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Revenues | $4,304,400 | $3,666,897 | 17.4% | $8,171,772 | $7,099,173 | 15.1% | | Gross profit | $833,771 | $684,001 | 21.9% | $1,556,489 | $1,273,310 | 22.2% | | Operating income | $415,212 | $332,808 | 24.8% | $733,968 | $592,761 | 23.8% | | Net income | $302,160 | $247,572 | 22.0% | $542,837 | $444,721 | 22.1% | | Basic EPS | $6.74 | $5.27 | 27.9% | $12.00 | $9.45 | 27.0% | | Diluted EPS | $6.72 | $5.25 | 28.0% | $11.96 | $9.41 | 27.1% | | Dividends declared per common share | $0.25 | $0.25 | 0.0% | $0.50 | $0.43 | 16.3% | Condensed Consolidated Statements of Comprehensive Income Presents EMCOR's net income and other comprehensive income, including foreign currency adjustments, for the periods ended June 30, 2025 and 2024 | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net income | $302,160 | $247,572 | $542,837 | $444,721 | | Foreign currency translation adjustments | $11,190 | $245 | $16,532 | $(971) | | Post-retirement plans, amortization of actuarial loss | $506 | $482 | $983 | $966 | | Other comprehensive income (loss) | $11,696 | $727 | $17,515 | $(5) | | Comprehensive income | $313,856 | $248,299 | $560,352 | $444,716 | Condensed Consolidated Statements of Cash Flows Outlines EMCOR's cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | Cash Flow Activity | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | YoY Change (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------ | | Net cash provided by operating activities | $302,158 | $411,958 | $(109,800) | | Net cash used in investing activities | $(938,825) | $(211,139) | $(727,686) | | Net cash used in financing activities | $(231,125) | $(181,444) | $(49,681) | | Effect of exchange rate changes on cash | $14,558 | $(927) | $15,485 | | (Decrease) increase in cash, cash equivalents, and restricted cash | $(853,234) | $18,448 | $(871,682) | | Cash, cash equivalents, and restricted cash at end of period | $487,161 | $808,198 | $(321,037) | - The decrease in operating cash flow was due to an increase in working capital, primarily on construction projects, as the company worked through upfront payments[173] - The significant increase in cash used in investing activities was predominantly due to the acquisition of Miller Electric[174] - The increase in cash used in financing activities was primarily due to a $283.2 million increase in common stock repurchases, partially offset by $250.0 million in net borrowings under the revolving credit facility[175] Condensed Consolidated Statements of Equity Details changes in EMCOR's total equity, including net income, other comprehensive income, and share repurchases, for the six months ended June 30, 2025 | Metric | Balance, Dec 31, 2024 (in thousands) | Net Income (6 months) | Other Comprehensive Income (6 months) | Repurchases of Common Stock (6 months) | Common Stock Dividends (6 months) | Balance, June 30, 2025 (in thousands) | | :------------------------------------ | :----------------------------------- | :-------------------- | :------------------------------------ | :------------------------------------- | :---------------------------------- | :------------------------------------ | | Total EMCOR Group, Inc. Stockholders' Equity | $2,937,657 | $542,837 | $17,515 | $(423,319) | $(22,640) | $3,051,601 | | Noncontrolling interests | $1,037 | — | — | — | — | $1,971 | | Total Equity | $2,938,694 | $542,837 | $17,515 | $(423,319) | $(22,640) | $3,053,572 | Notes to Consolidated Financial Statements Provides detailed explanations and disclosures for the consolidated financial statements, covering accounting policies, acquisitions, and other financial information NOTE 1 - Basis of Presentation The unaudited consolidated financial statements are prepared under Form 10-Q, including normal recurring adjustments, with Q2 2025 results not indicative of the full year - Unaudited consolidated financial statements are prepared in accordance with Form 10-Q and Rule 10-01 of Regulation S-X, with certain information and note disclosures condensed or omitted[29] - The statements include all adjustments (consisting only of those of a normal recurring nature) necessary to present fairly the financial position and results of operations[30] - Results for the three and six months ended June 30, 2025, are not necessarily indicative of the results to be expected for the full year ending December 31, 2025[30] NOTE 2 - New Accounting Pronouncements Discusses new FASB ASUs from December 2023 and November 2024, enhancing income tax and expense disclosures, with no expected financial impact - FASB issued ASU in December 2023 to enhance income tax disclosures, requiring additional information within income tax rate reconciliation and expanded disclosure of income taxes paid[31] - This ASU is effective for fiscal years beginning after December 15, 2024, and is not expected to impact financial position or results of operations, but the company is evaluating its impact on disclosures[31] - FASB issued ASU in November 2024 requiring disaggregated disclosures for certain income statement expense line items (inventory purchases, employee compensation, depreciation, intangible asset amortization, selling expenses), effective for fiscal years beginning after December 15, 2026[32] NOTE 3 - Revenue from Contracts with Customers EMCOR recognizes revenue over time using a five-step model, with remaining performance obligations totaling $11.91 billion as of June 30, 2025 - Revenue is recognized when promised goods or services are transferred to customers, applying a five-step model[33] - Revenue is generally recognized over time for construction contracts (cost-to-cost input method) and service contracts (straight-line or output method)[46][47][49] - Changes in estimates of transaction prices are recognized on a cumulative catch-up basis, potentially resulting in revenue recognition or reversal in current periods for prior period performance[42][50] Disaggregation of Revenues Provides a detailed breakdown of EMCOR's revenues by operating segment for the three and six months ended June 30, 2025 and 2024 | Segment | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | YoY Change (in thousands) | YoY Change (%) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------ | :------------- | | US electrical construction and facilities services | $1,340,247 | $799,994 | $540,253 | 67.5% | | US mechanical construction and facilities services | $1,755,258 | $1,655,181 | $100,077 | 6.0% | | US building services | $793,259 | $781,108 | $12,151 | 1.6% | | US industrial services | $281,072 | $324,047 | $(42,975) | -13.3% | | UK building services | $134,564 | $106,567 | $27,997 | 26.3% | | Consolidated revenues | $4,304,400 | $3,666,897 | $637,499 | 17.4% | | Segment | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | YoY Change (in thousands) | YoY Change (%) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------ | :------------- | | US electrical construction and facilities services | $2,428,091 | $1,564,705 | $863,386 | 55.2% | | US mechanical construction and facilities services | $3,327,860 | $3,082,846 | $245,014 | 7.9% | | US building services | $1,535,882 | $1,562,268 | $(26,386) | -1.7% | | US industrial services | $640,074 | $678,100 | $(38,026) | -5.6% | | UK building services | $239,865 | $211,254 | $28,611 | 13.5% | | Consolidated revenues | $8,171,772 | $7,099,173 | $1,072,589 | 15.1% | - The United States electrical construction and facilities services segment saw a significant revenue increase, primarily in the network and communications market sector (data centers) and healthcare, commercial, institutional, and transportation sectors[145] - The United States mechanical construction and facilities services segment also experienced strong growth in the network and communications market sector (data centers), manufacturing and industrial, and hospitality and entertainment sectors, partially offset by declines in high-tech manufacturing and commercial sectors[146] - The United States industrial services segment's revenue decreased due to lower turnaround project demand and fewer new build heat exchanger sales in its field and shop services divisions[148] Accounts Receivable and Allowance for Credit Losses Details the changes in EMCOR's allowance for credit losses, including provisions and write-offs, for the six months ended June 30, 2025 | Metric | Amount (in thousands) | | :------------------------------------ | :-------------------- | | Balance at December 31, 2024 | $34,957 | | Provision for credit losses | $9,029 | | Amounts written off against the allowance, net of recoveries | $(16,465) | | Balance at June 30, 2025 | $27,521 | - The decrease in allowance for credit losses was due to write-offs of previously reserved receivables in the U.S. building services segment, partially offset by a $5.0 million increase in the allowance for credit losses in the U.S. industrial services segment[67] Contract Assets and Contract Liabilities Presents EMCOR's contract assets and liabilities, highlighting the impact of acquisitions and revenue recognition on construction projects | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Contract assets, current | $348,048 | $284,791 | | Contract liabilities, current | $(2,133,872) | $(2,047,540) | | Contract liabilities, non-current | $(3,202) | $(1,526) | | Net contract liabilities | $(1,789,026) | $(1,764,275) | - Excluding acquisitions, net contract liabilities decreased by approximately $45.1 million due to revenue recognition on previously billed-ahead construction projects and being underbilled on certain contracts[71] - Acquisitions in 2025 increased contract assets by approximately $31.2 million and contract liabilities by approximately $101.0 million[71] Transaction Price Allocated to Remaining Unsatisfied Performance Obligations Details total remaining performance obligations by segment, totaling $11.91 billion as of June 30, 2025, with most expected within one year | Segment | June 30, 2025 (in thousands) | % of Total | | :------------------------------------------ | :----------------------------- | :--------- | | US electrical construction and facilities services | $4,198,244 | 35% | | US mechanical construction and facilities services | $5,975,201 | 50% | | US building services | $1,313,603 | 11% | | US industrial services | $221,102 | 2% | | Total US operations | $11,708,150 | 98% | | UK building services | $206,238 | 2% | | Total operations | $11,914,388 | 100% | - Remaining performance obligations increased by approximately $1.81 billion from December 31, 2024, to June 30, 2025[164] - Acquisitions, primarily Miller Electric, contributed approximately $0.96 billion to the increase in remaining performance obligations[164] - Approximately $9.38 billion (78.7%) of the remaining performance obligations are expected to be recognized as revenue within one year[76] NOTE 4 - Acquisitions of Businesses EMCOR acquired Miller Electric for $868.6 million in H1 2025, significantly expanding electrical construction, alongside three other companies for $38.8 million - On February 3, 2025, EMCOR acquired Miller Electric Company for approximately $868.6 million in cash, enhancing electrical construction capabilities in high-growth markets[78] - Miller Electric contributed $500.4 million in revenues and $21.8 million in operating income (net of $18.4 million amortization) from February 3 to June 30, 2025[78] - Three other companies were acquired in the first half of 2025 for $38.8 million, adding building automation, fire protection, and mechanical construction services, primarily integrated into the U.S. mechanical construction and facilities services segment[83] Miller Electric Acquired Assets (June 30, 2025) | Miller Electric Acquired Assets (June 30, 2025) | Amount (in thousands) | | :------------------------------------------ | :-------------------- | | Cash and cash equivalents | $18,394 | | Accounts receivable | $222,355 | | Contract assets | $23,120 | | Goodwill | $317,354 | | Identifiable intangible assets | $475,000 | | Total assets acquired | $1,104,945 | | Total liabilities assumed | $235,439 | | Net assets acquired | $868,572 | NOTE 5 - Earnings Per Share Diluted EPS increased to $6.72 (QoQ) and $11.96 (YoY H1) due to higher net income and reduced weighted average shares from repurchases | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (in thousands) | $302,160 | $247,572 | $542,837 | $444,721 | | Weighted average shares outstanding (basic) | 44,833,638 | 46,972,032 | 45,227,690 | 47,053,768 | | Shares used to compute diluted EPS | 44,990,388 | 47,159,660 | 45,380,744 | 47,236,738 | | Basic EPS | $6.74 | $5.27 | $12.00 | $9.45 | | Diluted EPS | $6.72 | $5.25 | $11.96 | $9.41 | - Diluted EPS benefited from a reduced weighted average share count due to common stock repurchases made throughout 2024 and the first half of 2025[138] NOTE 6 - Inventories Inventories increased to $108.2 million at June 30, 2025, driven by higher raw materials and construction materials | Inventory Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Raw materials and construction materials | $100,369 | $83,935 | | Work in process | $7,788 | $11,732 | | Total Inventories | $108,157 | $95,667 | NOTE 7 - Debt EMCOR had $250.0 million in borrowings under its $1.3 billion revolving credit facility as of June 30, 2025, with $978.5 million available capacity | Debt Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Revolving credit facility | $250,000 | — | | Finance lease liabilities | $6,386 | $6,095 | | Total debt | $256,386 | $6,095 | - The 2023 Revolving Credit Facility provides $1.3 billion in capacity, with $250.0 million in direct borrowings and $71.5 million in outstanding letters of credit as of June 30, 2025, leaving $978.5 million available[90][91][170] - The interest rate on borrowings under the revolving credit facility was 5.54% at June 30, 2025[92] - The company was in compliance with all financial covenants of the 2023 Credit Agreement as of June 30, 2025, and December 31, 2024[94] NOTE 8 - Fair Value Measurements EMCOR categorizes fair value measurements into a three-level hierarchy, with recurring assets as Level 1 and nonrecurring acquisition-related intangibles as Level 3 - Fair value hierarchy categorizes assets and liabilities into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (significant unobservable inputs)[96][97] Fair Value Measurements (June 30, 2025) | Asset Category | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------- | | Cash and cash equivalents | $485,988 | — | — | $485,988 | | Deferred compensation plan assets | $72,351 | — | — | $72,351 | | Restricted cash | $1,173 | — | — | $1,173 | | Total | $559,512 | — | — | $559,512 | - Identifiable intangible assets from acquisitions (customer relationships, contract backlog, trade name) are measured at fair value using Level 3 inputs and valuation techniques like relief from royalty and multi-period excess earnings methods[101][102] NOTE 9 - Income Taxes Income tax provision increased due to higher income, while the effective tax rate slightly decreased to 26.7% (QoQ) and 26.3% (YoY H1) due to earnings mix | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Income tax provision | $109,867 | $91,563 | $193,387 | $162,130 | | Income tax rate | 26.7% | 27.0% | 26.3% | 26.7% | - The increase in income tax provision was due to greater income before income taxes[105] - The decrease in effective income tax rate was primarily attributable to a decrease in the state and local effective tax rate due to changes in the mix of earnings[105] - The company is evaluating the future impact of The One Big Beautiful Bill Act of 2025 (OBBBA), which makes permanent key elements of the Tax Cuts and Jobs Act, including accelerated bonus depreciation[107] NOTE 10 - Common Stock EMCOR had 44.8 million shares outstanding, repurchased $423.3 million in shares in H1 2025, and authorized an additional $500 million for repurchases - As of June 30, 2025, 44,762,776 shares of common stock were outstanding[108] - The Board increased the share repurchase authorization by $500 million in February 2025, totaling $3.15 billion since inception[110] - During the six months ended June 30, 2025, approximately 1.1 million shares were repurchased for $423.3 million, with $336.2 million remaining authorization[110] - A regular quarterly dividend of $0.25 per share was paid[109] NOTE 11 - Retirement Plans EMCOR recognizes defined benefit plan funded status, with the UK Plan reporting net periodic pension losses of $26 thousand (QoQ) and $51 thousand (YoY H1) - The funded status of defined benefit plans is recognized in the Consolidated Balance Sheets, with adjustments to accumulated other comprehensive income (loss)[111] Component of Net Periodic Pension Income (UK Plan) | Component of Net Periodic Pension Income (UK Plan) | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Interest cost | $2,552 | $2,362 | $4,968 | $4,738 | | Expected return on plan assets | $(3,268) | $(3,213) | $(6,362) | $(6,445) | | Amortization of unrecognized loss | $690 | $648 | $1,343 | $1,301 | | Net periodic pension income | $(26) | $(203) | $(51) | $(406) | NOTE 12 - Commitments and Contingencies EMCOR faces commitments including $2.7 billion in surety bond exposure and $262.1 million in insurance liabilities, with ongoing legal proceedings covered by insurance - EMCOR guarantees subsidiary obligations under certain contracts, historically incurring no substantial liabilities[115] - As of June 30, 2025, the aggregate estimated exposure from surety bonds for construction contracts was approximately $2.7 billion, representing 23% of total remaining performance obligations[116] - The company is named in several lawsuits related to a chemical release at the PEMEX Deer Park Refinery, but believes insurance will cover much or all of any amounts required to be paid[122] - Insurance liabilities, net of estimated recoveries, were $262.1 million as of June 30, 2025, with $56.6 million estimated to be payable within the next 12 months[123][181] NOTE 13 - Additional Cash Flow Information Cash paid for interest increased to $7.8 million and income taxes to $254.9 million in H1 2025, alongside higher operating lease payments | Cash Paid For | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | YoY Change (in thousands) | | :------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------ | | Interest | $7,767 | $856 | $6,911 | | Income taxes | $254,949 | $191,694 | $63,255 | | Right-of-use assets obtained in exchange for new operating lease liabilities | $120,907 | $65,180 | $55,727 | | Right-of-use assets obtained in exchange for new finance lease liabilities | $1,665 | $2,566 | $(901) | NOTE 14 - Segment Information EMCOR operates five reportable segments, with performance assessed by operating income, detailing revenues and profitability for each - EMCOR operates through five reportable segments: United States electrical construction and facilities services, United States mechanical construction and facilities services, United States building services, United States industrial services, and United Kingdom building services[128] - The Chief Operating Decision Maker (CODM) evaluates segment performance based on operating income[126] Segment Revenues (3 Months Ended June 30) | Segment Revenues (3 Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | YoY Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :------------- | | US electrical construction and facilities services | $1,340,247 | $799,994 | 67.5% | | US mechanical construction and facilities services | $1,755,258 | $1,655,181 | 6.0% | | US building services | $793,259 | $781,108 | 1.6% | | US industrial services | $281,072 | $324,047 | -13.3% | | UK building services | $134,564 | $106,567 | 26.3% | | Consolidated revenues | $4,304,400 | $3,666,897 | 17.4% | Segment Operating Income (3 Months Ended June 30) | Segment Operating Income (3 Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | YoY Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :------------- | | US electrical construction and facilities services | $157,644 | $88,577 | 78.0% | | US mechanical construction and facilities services | $238,737 | $213,440 | 11.8% | | US building services | $50,045 | $46,839 | 6.8% | | US industrial services | $(419) | $12,746 | -103.3% | | UK building services | $8,425 | $5,777 | 45.8% | | Corporate administration | $(39,220) | $(34,571) | 13.4% | | Consolidated operating income | $415,212 | $332,808 | 24.8% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations EMCOR achieved record Q2 2025 revenues of $4.30 billion and operating income of $415.2 million, driven by strong demand and acquisitions, with robust liquidity - Revenues of $4.30 billion for Q2 2025 set a new quarterly record, increasing 17.4% YoY, with incremental acquisition contribution of approximately $330.3 million[136] - Operating income for Q2 2025 was a record $415.2 million, with an operating margin of 9.6%, a 50 basis point expansion YoY, predominantly due to improved operating performance in U.S. construction segments[137] - Net income of $302.2 million and diluted EPS of $6.72 for Q2 2025 compare favorably to the prior year, benefiting from increased operating income and a reduced weighted average share count due to repurchases[138] Business Description EMCOR is a leading specialty contractor in the U.S., providing diverse electrical, mechanical, and facilities services through approximately 100 subsidiaries - EMCOR is one of the largest specialty contractors in the U.S., providing electrical and mechanical construction, facilities services, building services, and industrial services[134] - Services are delivered through approximately 100 operating subsidiaries to a broad range of commercial, technology, manufacturing, industrial, healthcare, utility, and institutional customers[134] - The company's reportable segments include United States electrical construction and facilities services, United States mechanical construction and facilities services, United States building services, United States industrial services, and United Kingdom building services[139] Overview Summarizes EMCOR's record Q2 2025 financial performance, including 17.4% revenue growth and 24.8% operating income growth, partly due to acquisitions | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YoY Change (%) | | :--------------------------------- | :--------------------- | :--------------------- | :------------- | | Revenues | $4,304,400 | $3,666,897 | 17.4% | | Gross profit | $833,771 | $684,001 | 21.9% | | Operating income | $415,212 | $332,808 | 24.8% | | Operating income as % of revenues | 9.6% | 9.1% | +0.5 pp | | Net income | $302,160 | $247,572 | 22.0% | | Diluted earnings per common share | $6.72 | $5.25 | 28.0% | - Revenues for Q2 2025 included incremental acquisition contribution of approximately $330.3 million[136] - Operating income for Q2 2025 included incremental acquisition contribution of $9.2 million, net of $12.5 million amortization expense[137] Impact of Acquisitions Details the strategic acquisitions in H1 2025, including Miller Electric for $868.6 million, enhancing electrical and mechanical construction capabilities - Miller Electric Company was acquired in Q1 2025 for approximately $868.6 million, integrated into the U.S. electrical construction and facilities services segment[141] - Three additional companies were acquired in H1 2025 for $38.8 million, adding building automation, fire protection, and mechanical construction services to the U.S. mechanical construction segment[141] - Seven companies were acquired in 2024 for $231.1 million, expanding capabilities across U.S. electrical, mechanical, building, and industrial services segments[142] Results of Operations Analyzes EMCOR's financial performance, including revenues, cost of sales, SG&A, and operating income, across its various segments Revenues Presents a detailed breakdown of consolidated and segment revenues, highlighting significant growth in U.S. construction, particularly data centers | Segment Revenues (3 Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | YoY Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :------------- | | US electrical construction and facilities services | $1,340,247 | $799,994 | 67.5% | | US mechanical construction and facilities services | $1,755,258 | $1,655,181 | 6.0% | | US building services | $793,259 | $781,108 | 1.6% | | US industrial services | $281,072 | $324,047 | -13.3% | | UK building services | $134,564 | $106,567 | 26.3% | | Consolidated revenues | $4,304,400 | $3,666,897 | 17.4% | | Segment Revenues (6 Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | YoY Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :------------- | | US electrical construction and facilities services | $2,428,091 | $1,564,705 | 55.2% | | US mechanical construction and facilities services | $3,327,860 | $3,082,846 | 7.9% | | US building services | $1,535,882 | $1,562,268 | -1.7% | | US industrial services | $640,074 | $678,100 | -5.6% | | UK building services | $239,865 | $211,254 | 13.5% | | Consolidated revenues | $8,171,772 | $7,099,173 | 15.1% | - Revenue growth was most significant in U.S. construction segments, particularly the network and communications market sector (data centers)[144][145][146] - U.S. industrial services segment revenues decreased due to lower turnaround project demand and fewer new build heat exchanger sales[148] Cost of sales and gross profit Discusses the 16.4% increase in cost of sales and 21.9% increase in gross profit for Q2 2025, driven by U.S. construction and acquisitions | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | YoY Change (%) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | YoY Change (%) | | :---------------- | :------------------------------------------ | :------------------------------------------ | :------------- | :------------------------------------------ | :------------------------------------------ | :------------- | | Cost of sales | $3,470,629 | $2,982,896 | 16.4% | $6,615,283 | $5,825,863 | 13.5% | | Gross profit | $833,771 | $684,001 | 21.9% | $1,556,489 | $1,273,310 | 22.2% | | Gross profit margin | 19.4% | 18.7% | +0.7 pp | 19.0% | 17.9% | +1.1 pp | - Increases in gross profit and margin were driven by U.S. construction segments and U.S. building services, due to improved revenue mix and excellent project execution[150] - Acquisitions contributed $43.7 million and $85.4 million to gross profit for the three and six months ended June 30, 2025, respectively[150] Selling, general and administrative expenses SG&A expenses increased 19.2% for Q2 2025, primarily due to acquisition-related costs and higher incentive compensation | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | YoY Change (%) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | YoY Change (%) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------- | :------------------------------------------ | :------------------------------------------ | :------------- | | Selling, general and administrative expenses | $418,559 | $351,193 | 19.2% | $822,521 | $680,549 | 20.9% | | SG&A margin | 9.7% | 9.6% | +0.1 pp | 10.1% | 9.6% | +0.5 pp | - SG&A expenses included $34.4 million (QoQ) and $62.0 million (YoY H1) of incremental expenses directly related to acquired companies, including amortization[151] - Excluding acquisition-related expenses, SG&A increased due to higher incentive compensation, salaries, and computer hardware/software costs[152] - The 50 basis point increase in SG&A margin for the six months was due to improved gross profit (leading to higher incentive compensation), revenue decreases in U.S. building and industrial services, and $9.4 million in Miller Electric acquisition transaction costs[153][78] Operating income (loss) Consolidated operating income increased 24.8% for Q2 2025, driven by U.S. construction segments, despite a loss in U.S. industrial services | Segment Operating Income (3 Months Ended June 30) | 2025 (in thousands) | % of Segment Revenues | 2024 (in thousands) | % of Segment Revenues | | :------------------------------------------ | :------------------ | :-------------------- | :------------------ | :-------------------- | | US electrical construction and facilities services | $157,644 | 11.8% | $88,577 | 11.1% | | US mechanical construction and facilities services | $238,737 | 13.6% | $213,440 | 12.9% | | US building services | $50,045 | 6.3% | $46,839 | 6.0% | | US industrial services | $(419) | (0.1)% | $12,746 | 3.9% | | UK building services | $8,425 | 6.3% | $5,777 | 5.4% | | Consolidated operating income | $415,212 | 9.6% | $332,808 | 9.1% | | Segment Operating Income (6 Months Ended June 30) | 2025 (in thousands) | % of Segment Revenues | 2024 (in thousands) | % of Segment Revenues | | :------------------------------------------ | :------------------ | :-------------------- | :------------------ | :-------------------- | | US electrical construction and facilities services | $293,701 | 12.1% | $180,166 | 11.5% | | US mechanical construction and facilities services | $425,484 | 12.8% | $364,160 | 11.8% | | US building services | $86,468 | 5.6% | $80,298 | 5.1% | | US industrial services | $6,341 | 1.0% | $30,712 | 4.5% | | UK building services | $13,412 | 5.6% | $11,154 | 5.3% | | Consolidated operating income | $733,968 | 9.0% | $592,761 | 8.3% | - Increased profitability was predominantly due to improved operating performance in U.S. construction segments, driven by a more favorable mix of work and better project execution, including enhanced productivity from virtual design, prefabrication, and automation investments[155] - U.S. industrial services segment reported an operating loss for Q2 2025 and a significant decline in operating income for H1 2025, primarily due to revenue reductions, unabsorbed labor costs, a less favorable revenue mix, and a $5.0 million increase in the allowance for credit losses[159] Other items Details changes in net periodic pension income, interest expense, income before taxes, and effective income tax rates for the periods | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net periodic pension income | $55 | $221 | $109 | $443 | | Interest (expense) income, net | $(3,240) | $6,106 | $2,147 | $13,647 | | Income before income taxes | $412,027 | $339,135 | $736,224 | $606,851 | | Income tax provision | $109,867 | $91,563 | $193,387 | $162,130 | | Effective income tax rate | 26.7% | 27.0% | 26.3% | 26.7% | - The shift from net interest income to net interest expense (QoQ) and reduction in net interest income (YoY H1) was due to increased borrowings under the revolving credit facility and a lower average daily invested cash balance[162] Remaining Unsatisfied Performance Obligations Total remaining performance obligations increased by $1.81 billion to $11.91 billion, with acquisitions contributing $0.96 billion | Segment | June 30, 2025 (in thousands) | % of Total | December 31, 2024 (in thousands) | % of Total | June 30, 2024 (in thousands) | % of Total | | :------------------------------------------ | :----------------------------- | :--------- | :------------------------------- | :--------- | :----------------------------- | :--------- | | US electrical construction and facilities services | $4,198,244 | 35% | $3,068,396 | 31% | $2,632,120 | 29% | | US mechanical construction and facilities services | $5,975,201 | 50% | $5,463,096 | 54% | $4,758,744 | 53% | | US building services | $1,313,603 | 11% | $1,246,642 | 12% | $1,345,089 | 15% | | US industrial services | $221,102 | 2% | $138,599 | 1% | $99,022 | 1% | | UK building services | $206,238 | 2% | $185,466 | 2% | $164,248 | 2% | | Total operations | $11,914,388 | 100% | $10,102,199 | 100% | $8,999,223 | 100% | - The increase in RPO was approximately $1.81 billion compared to December 31, 2024, with acquisitions (notably Miller Electric) accounting for approximately $0.96 billion[164] - Growth in RPO was seen across most market sectors, with significant increases in network and communications (data centers), institutional, manufacturing and industrial, commercial, and hospitality and entertainment[164] Liquidity and Capital Resources Discusses EMCOR's financial flexibility, including cash, credit facility availability, and material cash requirements for operations and investments - As of June 30, 2025, EMCOR had $486.0 million in cash and cash equivalents and $978.5 million of available capacity under its $1.3 billion revolving credit facility[170] - Material cash requirements include working capital, business acquisitions, capital expenditures, debt payments, and shareholder returns (share repurchases and dividends)[167] Cash Flows Analyzes changes in cash flows from operating, investing, and financing activities, including the impact of acquisitions and share repurchases | Cash Flow Activity | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | YoY Change (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------ | | Net cash provided by operating activities | $302,158 | $411,958 | $(109,800) | | Net cash used in investing activities | $(938,825) | $(211,139) | $(727,686) | | Net cash used in financing activities | $(231,125) | $(181,444) | $(49,681) | | (Decrease) increase in cash, cash equivalents, and restricted cash | $(853,234) | $18,448 | $(871,682) | - Operating cash flow decreased due to an increase in working capital, as the company recognized revenue on projects previously billed ahead[173] - Investing cash flow increased significantly due to payments for the acquisition of Miller Electric[174] - Financing cash flow increased due to a $283.2 million increase in common stock repurchases, partially offset by $250.0 million in net borrowings under the revolving credit facility[175] Material Cash Requirements from Contractual and Other Obligations Outlines EMCOR's significant future cash obligations, including debt, lease liabilities, purchase obligations, and insurance liabilities - Outstanding debt under the revolving credit facility was $250.0 million as of June 30, 2025[178] - Future payments for operating and finance leases total $499.3 million, with $112.1 million due within the next 12 months[179] - Open purchase obligations amount to $2.82 billion, with approximately $2.39 billion expected within the next 12 months[180] - Net insurance liabilities are $262.1 million, with $56.6 million estimated to be payable within 12 months[181] - Contingent consideration liabilities have a present value of $15.0 million, with $13.5 million estimated as payable within 12 months[182] Off-Balance Sheet Arrangements and Other Commercial Commitments Details EMCOR's off-balance sheet arrangements, including $2.7 billion in surety bonds and guarantees for subsidiary obligations - Aggregate estimated exposure from surety bonds for construction contracts was approximately $2.7 billion as of June 30, 2025, representing 23% of total remaining performance obligations[185] - Surety bonds and letters of credit are used as collateral for insurance programs, totaling $61.7 million and $71.2 million respectively, as of June 30, 2025[187] - The company guarantees obligations of its subsidiaries under certain contracts but has not incurred substantial liabilities historically[191] New Accounting Pronouncements Refers to Note 2 for details on new accounting standards and their anticipated impact on EMCOR's financial reporting - Refers to Note 2 - New Accounting Pronouncements for details on new accounting standards, their anticipated adoption dates, and expected impact on consolidated financial position, results of operations, or liquidity[192] Critical Accounting Policies and Estimates Refers to the Form 10-K for significant accounting policies, noting no material changes in H1 2025 - Refers to Note 2 - Summary of Significant Accounting Policies in the Form 10-K for a description of significant accounting policies and estimates[193] - No significant changes to critical accounting policies or methods occurred during the six months ended June 30, 2025[193] Item 3. Quantitative and Qualitative Disclosures about Market Risk EMCOR faces market risks from interest rate fluctuations, construction market conditions, and commodity price volatility, with limited foreign currency exposure - EMCOR is exposed to market risk from changes in interest rates on variable-rate borrowings under its revolving credit facility[195] - A 50 basis point increase in interest rates would increase interest expense, net of income taxes, by approximately $0.9 million in the next twelve months, based on $250.0 million outstanding borrowings[195] - Construction market risk relates to potential impacts on accounts receivable or contract assets if customers' ability to pay is negatively affected by economic conditions; the company monitors creditworthiness and contract status[196] - Exposure to foreign currency fluctuations is limited as foreign operations primarily invoice and collect in local currencies[197] - The company is exposed to market risk from fluctuations in commodity prices (e.g., copper, steel) and energy prices, which could reduce profitability on fixed-price contracts if not recoverable through price adjustments[198] Item 4. Controls and Procedures EMCOR's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Disclosure controls and procedures were effective as of June 30, 2025, as concluded by the Chairman, President, and CEO, and the Senior Vice President, CFO, and Chief Accounting Officer[199] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[200] PART II. - Other Information Covers legal proceedings, equity sales, mine safety, other information, and the exhibit index for EMCOR's quarterly report Item 1. Legal Proceedings Information on legal proceedings is incorporated by reference from Note 12 - Commitments and Contingencies - Information on legal proceedings is incorporated by reference from Note 12 - Commitments and Contingencies[201] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds EMCOR repurchased 573,001 shares for $353.65 per share in April 2025, with $336.2 million remaining authorized for repurchases | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares That May Yet Be Purchased | | :------------------------------ | :----------------------------- | :--------------------------- | :----------------------------------------------------------- | | April 1, 2025 to April 30, 2025 | 573,001 | $353.65 | $336,162,101 | | May 1, 2025 to May 31, 2025 | — | — | $336,162,101 | | June 1, 2025 to June 30, 2025 | — | — | $336,162,101 | | Total | 573,001 | $353.65 | | - As of June 30, 2025, approximately $336.2 million remained authorized for repurchases under the share repurchase program, which has no expiration date[205] Item 4. Mine Safety Disclosures Mine safety violations and regulatory matters are detailed in Exhibit 95.1 of this quarterly report - Information concerning mine safety violations or other regulatory matters is included in Exhibit 95.1[203] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 or non-10b5-1 trading arrangements during Q2 2025 - No directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements or non-10b5-1 trading arrangements during the quarter ended June 30, 2025[204] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including corporate governance documents, Sarbanes-Oxley certifications, and iXBRL financial statements - The exhibit index includes corporate governance documents (Certificate of Incorporation, By-Laws), Sarbanes-Oxley certifications (Sections 302 and 906), mine safety disclosures, and iXBRL formatted financial statements[207]