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EMCOR Group, Inc. Reports First Quarter 2023 Results

- Record First Quarter Revenues of $2.89 billion, 11.5% Increase Year-over-Year -

- Record First Quarter Diluted EPS of $2.32, 66.9% Increase Year-over-Year -

- Record Remaining Performance Obligations of $7.87 billion, 32.3% Increase Year-over-Year -

- Increases 2023 Diluted EPS Guidance Range to $9.25 - $10.00 from $8.75 - $9.50 -

EMCOR Group, Inc. (NYSE: EME) today reported results for the quarter ended March 31, 2023.

For the first quarter of 2023, net income was $111.5 million, or $2.32 per diluted share, compared to $73.4 million, or $1.39 per diluted share, for the first quarter of 2022. Revenues for the first quarter of 2023 totaled $2.89 billion, an increase of 11.5% from the year ago period.

Operating income for the first quarter of 2023 was $154.9 million, or 5.4% of revenues, compared to $100.0 million, or 3.9% of revenues, for the first quarter of 2022.

Selling, general and administrative expenses for the first quarter of 2023 totaled $281.2 million, or 9.7% of revenues, compared to $252.6 million, or 9.7% of revenues, for the first quarter of 2022.

The Company's income tax rate for the first quarter of 2023 was 27.0% compared to an income tax rate of 26.5% for the first quarter of 2022.

Remaining performance obligations as of March 31, 2023 were $7.87 billion, compared to $5.95 billion as of March 31, 2022. Total remaining performance obligations grew approximately $1.92 billion year-over-year.

Tony Guzzi, Chairman, President and Chief Executive Officer of EMCOR, commented, “The Company posted record first quarter revenues reflecting solid year-over-year growth despite a challenging operating environment. Strong demand for our services across several resilient non-residential market sectors, and from the majority of our reportable segments, drove revenue growth of 11.5% during the quarter, 10.1% of which was organic. Our consolidated operating margin expanded 150 basis points to 5.4% despite persistent inflationary and supply chain challenges. We continue to have strong near-term visibility with a healthy project pipeline reflected by our record remaining performance obligations of $7.87 billion, which grew $1.92 billion, or 32.3%, year-over-year.”

Mr. Guzzi added, “Our U.S. Construction segments drove another quarter of solid top-line growth, up a combined 13.8% year-over-year, led by our U.S. Electrical Construction segment, which delivered revenue growth of 23.5% year-over-year. Our U.S. Mechanical Construction segment continues to perform exceptionally well with first quarter operating margin of 8.0% and organic revenue growth of 8.7% year-over-year. Our U.S. Building Services segment generated a 14.1% increase in revenues, driven by its mechanical services division, which continued to experience broad based growth across all service lines. Operating margin of U.S. Building services increased to 5.2% as we successfully executed project work and managed to address some of the supply chain challenges that negatively impacted our business last year. Our U.S. Industrial Services segment improved at a steady pace, delivering solid revenue and operating income results as we continue to see modest increases in the demand for our services and we execute work for our customers. Finally, our U.K. Building Services segment had declines in revenue and operating income as it faced recessionary pressure and foreign exchange headwinds.”

Based on year-to-date performance, current operating conditions, and strong near-term visibility, EMCOR is increasing its full-year 2023 diluted earnings per share guidance range to $9.25 to $10.00, an increase from the prior guidance range of $8.75 to $9.50. The Company is maintaining its full-year 2023 revenue guidance of $12.0 billion to $12.5 billion.

Mr. Guzzi concluded, “Looking forward at the balance of the year, we will continue to execute with discipline and flexibility. We are positioned well as we advance forward through 2023 and, while supply chain challenges and inflationary pressures still exist, we will continue to adapt to these challenges through better planning, estimating, and resource allocation. We expect to generate strong operating cash flow and remain committed to our balanced capital allocation strategy, pursuing both organic investments and strategic acquisitions, as well as returning capital to shareholders through share repurchases and dividends.”

EMCOR Group, Inc. is a Fortune 500 leader in mechanical and electrical construction services, industrial and energy infrastructure and building services. This press release and other press releases may be viewed at the Company’s website at www.emcorgroup.com. EMCOR routinely posts information that may be important to investors in the “Investor Relations” section of our website at www.emcorgroup.com. Investors and potential investors are encouraged to consult the EMCOR website regularly for important information about EMCOR.

EMCOR Group's first quarter conference call will be available live via internet broadcast today, Thursday, April 27, at 10:30 AM Eastern Daylight Time. The live call may be accessed through the Company's website at www.emcorgroup.com.

Forward Looking Statements:

This release contains certain forward-looking statements. Any such comments speak only as of April 27, 2023, and EMCOR assumes no obligation to update any such forward-looking statements, unless required by law. These forward-looking statements may include statements regarding anticipated future operating and financial performance, including financial guidance and projections underlying that guidance; the nature and impact of our remaining performance obligations; our ability to pursue acquisitions; our ability to return capital to shareholders; market opportunities; market growth prospects; customer trends; project mix; and projects with varying profit margins and contractual terms. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated (whether expressly or implied) by the forward-looking statements. Accordingly, these statements do not guarantee future performance or events. Applicable risks and uncertainties include, but are not limited to, adverse effects of general economic conditions; changes in interest rates; domestic and international political developments; changes in the specific markets for EMCOR’s services; adverse business conditions, including labor market tightness, productivity challenges, the nature and extent of supply chain disruptions impacting availability and pricing of materials, and inflationary trends more generally, including fluctuations in energy costs; the impact of legislation and/or government regulations; the availability of adequate levels of surety bonding; increased competition; unfavorable developments in the mix of our business; and the continuing impact of the COVID-19 pandemic, on our revenue and operations. Certain of the risk factors associated with EMCOR’s business are also discussed in Part I, Item 1A “Risk Factors,” of the Company’s 2022 Form 10-K, and in other reports filed from time to time with the Securities and Exchange Commission and available at www.sec.gov and www.emcorgroup.com. Such risk factors should be taken into account in evaluating any forward-looking statements.

Non-GAAP Measures:

This release may include certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles (GAAP). Reconciliations of those non-GAAP financial measures to the most directly comparable GAAP financial measures are included in this release. The Company uses these non-GAAP measures as key performance indicators for the purpose of evaluating performance internally. We also believe that these non-GAAP measures provide investors with useful information with respect to our ongoing operations. Any non-GAAP financial measures presented are not, and should not be viewed as, substitutes for financial measures required by GAAP, have no standardized meaning prescribed by GAAP, and may not be comparable to the calculation of similar measures of other companies.

EMCOR GROUP, INC.

FINANCIAL HIGHLIGHTS

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share information)

(Unaudited)

 

 

 

For the quarters ended

March 31,

 

 

 

2023

 

 

 

2022

 

Revenues

 

$

2,890,432

 

 

$

2,592,549

 

Cost of sales

 

 

2,454,370

 

 

 

2,239,994

 

Gross profit

 

 

436,062

 

 

 

352,555

 

Selling, general and administrative expenses

 

 

281,152

 

 

 

252,598

 

Operating income

 

 

154,910

 

 

 

99,957

 

Net periodic pension (cost) income

 

 

(274

)

 

 

1,169

 

Interest expense, net

 

 

(1,832

)

 

 

(1,289

)

Income before income taxes

 

 

152,804

 

 

 

99,837

 

Income tax provision

 

 

41,331

 

 

 

26,451

 

Net income

 

$

111,473

 

 

$

73,386

 

 

 

 

 

 

Basic earnings per common share

 

$

2.33

 

 

$

1.39

 

 

 

 

 

 

Diluted earnings per common share

 

$

2.32

 

 

$

1.39

 

 

 

 

 

 

Weighted average shares of common stock outstanding:

 

 

 

 

Basic

 

 

47,775,819

 

 

 

52,713,005

 

Diluted

 

 

47,945,815

 

 

 

52,916,559

 

 

 

 

 

 

Dividends declared per common share

 

$

0.15

 

 

$

0.13

 

 

 

 

 

 

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

(Unaudited)

March 31,

2023

 

December 31,

2022

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

420,075

 

$

456,439

Accounts receivable, net

 

 

2,669,356

 

 

2,567,371

Contract assets

 

 

302,750

 

 

273,176

Inventories

 

 

100,405

 

 

85,641

Prepaid expenses and other

 

 

69,834

 

 

79,346

Total current assets

 

 

3,562,420

 

 

3,461,973

Property, plant and equipment, net

 

 

160,417

 

 

157,819

Operating lease right-of-use assets

 

 

274,917

 

 

268,063

Goodwill

 

 

923,274

 

 

919,151

Identifiable intangible assets, net

 

 

584,598

 

 

593,975

Other assets

 

 

135,284

 

 

123,626

Total assets

 

$

5,640,910

 

$

5,524,607

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt and finance lease liabilities

 

$

15,524

 

$

15,567

Accounts payable

 

 

724,104

 

 

849,284

Contract liabilities

 

 

1,156,530

 

 

1,098,263

Accrued payroll and benefits

 

 

385,621

 

 

465,000

Other accrued expenses and liabilities

 

 

310,793

 

 

258,190

Operating lease liabilities, current

 

 

68,819

 

 

67,218

Total current liabilities

 

 

2,661,391

 

 

2,753,522

Borrowings under revolving credit facility

 

 

100,000

 

 

Long-term debt and finance lease liabilities

 

 

231,319

 

 

231,625

Operating lease liabilities, long-term

 

 

226,288

 

 

220,764

Other long-term obligations

 

 

355,587

 

 

344,405

Total liabilities

 

 

3,574,585

 

 

3,550,316

Equity:

 

 

 

 

Total EMCOR Group, Inc. stockholders’ equity

 

 

2,065,623

 

 

1,973,589

Noncontrolling interests

 

 

702

 

 

702

Total equity

 

 

2,066,325

 

 

1,974,291

Total liabilities and equity

 

$

5,640,910

 

$

5,524,607

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Quarters Ended March 31, 2023 and 2022

(In thousands) (Unaudited)

 

 

 

 

2023

 

 

 

2022

 

Cash flows - operating activities:

 

 

 

 

Net income

 

$

111,473

 

 

$

73,386

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

Depreciation and amortization

 

 

12,621

 

 

 

11,578

 

Amortization of identifiable intangible assets

 

 

15,877

 

 

 

15,551

 

Non-cash share-based compensation expense

 

 

4,087

 

 

 

3,438

 

Other reconciling items

 

 

162

 

 

 

(226

)

Changes in operating assets and liabilities, excluding the effect of businesses acquired

 

 

(228,803

)

 

 

(199,541

)

Net cash used in operating activities

 

 

(84,583

)

 

 

(95,814

)

Cash flows - investing activities:

 

 

 

 

Payments for acquisitions of businesses, net of cash acquired

 

 

(11,834

)

 

 

(2,914

)

Proceeds from sale or disposal of property, plant and equipment

 

 

9,583

 

 

 

462

 

Purchases of property, plant and equipment

 

 

(23,154

)

 

 

(11,501

)

Net cash used in investing activities

 

 

(25,405

)

 

 

(13,953

)

Cash flows - financing activities:

 

 

 

 

Proceeds from revolving credit facility

 

 

100,000

 

 

 

 

Repayments of finance lease liabilities

 

 

(780

)

 

 

(979

)

Dividends paid to stockholders

 

 

(7,151

)

 

 

(6,930

)

Repurchases of common stock

 

 

(16,033

)

 

 

(181,810

)

Taxes paid related to net share settlements of equity awards

 

 

(5,242

)

 

 

(4,944

)

Issuances of common stock under employee stock purchase plan

 

 

2,168

 

 

 

1,955

 

Payments for contingent consideration arrangements

 

 

(1,456

)

 

 

(805

)

Net cash provided by (used in) financing activities

 

 

71,506

 

 

 

(193,513

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

2,239

 

 

 

(3,419

)

Decrease in cash, cash equivalents, and restricted cash

 

 

(36,243

)

 

 

(306,699

)

Cash, cash equivalents, and restricted cash at beginning of year (1)

 

 

457,068

 

 

 

822,568

 

Cash, cash equivalents, and restricted cash at end of period (2)

 

$

420,825

 

 

$

515,869

 

_________

(1) 

 

Includes $0.6 million and $1.2 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively.

(2) 

 

Includes $0.8 million and $1.4 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of March 31, 2023 and March 31, 2022, respectively.

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands) (Unaudited)

 

 

 

For the quarters ended

March 31,

 

 

 

2023

 

 

2022

Revenues from unrelated entities:

 

 

 

 

United States electrical construction and facilities services

 

$

644,746

 

$

522,030

United States mechanical construction and facilities services

 

 

1,078,558

 

 

992,644

United States building services

 

 

725,375

 

 

635,627

United States industrial services

 

 

330,883

 

 

310,751

Total United States operations

 

 

2,779,562

 

 

2,461,052

United Kingdom building services

 

 

110,870

 

 

131,497

Total operations

 

$

2,890,432

 

$

2,592,549

 

 

 

 

 

 

 

For the quarters ended

March 31,

 

 

 

2023

 

 

 

2022

 

Operating income (loss):

 

 

 

 

United States electrical construction and facilities services

 

$

40,516

 

 

$

19,993

 

United States mechanical construction and facilities services

 

 

86,227

 

 

 

58,433

 

United States building services

 

 

37,650

 

 

 

24,163

 

United States industrial services

 

 

15,020

 

 

 

13,258

 

Total United States operations

 

 

179,413

 

 

 

115,847

 

United Kingdom building services

 

 

5,424

 

 

 

10,588

 

Corporate administration

 

 

(29,927

)

 

 

(26,478

)

Total operations

 

 

154,910

 

 

 

99,957

 

Other items:

 

 

 

 

Net periodic pension (cost) income

 

 

(274

)

 

 

1,169

 

Interest expense, net

 

 

(1,832

)

 

 

(1,289

)

Income before income taxes

 

$

152,804

 

 

$

99,837

 

 

 

 

 

 

EMCOR GROUP, INC.

RECONCILIATION OF ORGANIC REVENUE GROWTH

(In thousands, except for percentages) (Unaudited)

The following table provides a reconciliation between organic revenue growth, a non-GAAP measure, and total revenue growth for the quarter ended March 31, 2023.

 

 

For the quarter ended

March 31, 2023

 

 

$

 

%

GAAP revenue growth

 

$

297,883

 

 

11.5

%

Incremental revenues from acquisitions

 

 

(35,220

)

 

(1.4

)%

Organic revenue growth, a non-GAAP measure

 

$

262,663

 

 

10.1

%

 

Contacts

R. Kevin Matz

Executive Vice President

Shared Services

(203) 849-7938

FTI Consulting, Inc.

Investors: Blake Mueller

(718) 578-3706

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