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Incorporated in 1987, EMCOR Group is a leading provider of construction, industrial, and building services in the United States and the United Kingdom. The company’s services include plumbing systems, roadway and transit lighting, and geothermal solutions, as well as program management and landscaping.

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EMCOR Group (EME): Company Profile, Stock Price, News, Rankings

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EMCOR Group

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Good morning. My name is Dave, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group Second Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star and the number one on your telephone keypad. If you would like to withdraw your question, please press star and the number two. I will now turn the call over to Lucas Sullivan, Director, Financial Planning and Analysis. Mr. Sullivan, you may begin.

Thank you, Dave. Good morning, everyone, and welcome to EMCOR's Second Quarter 2026 Earnings Conference Call. For those of you joining us by webcast, we are at the beginning of our slide presentation that will accompany our remarks today. This presentation will be archived in the investor relations section of our website at emcorgroup.com. With me today are Tony Guzzi, our Chairman, President, and Chief Executive Officer, Jason Nalbandian, Senior Vice President and EMCOR's Chief Financial Officer, and Maxine Mauricio, Executive Vice President, Chief Administrative Officer, and General Counsel. For today's call, Tony will provide comments on our second quarter and discuss our RPOs. Jason will review the second quarter numbers, then turn it back to Tony to discuss our guidance before we open it up for Q&A.

Before we begin, a quick reminder that this presentation and discussion contains certain forward-looking statements and may contain certain non-GAAP financial information. Slide two of our presentation describes in detail these forward-looking statements and the non-GAAP financial information disclosures. I encourage everyone to review both disclosures in conjunction with our discussion and accompanying slides. Finally, as a reminder, all financial information discussed during this morning's call is included in our consolidated financial statements within both our earnings press release issued this morning and in our Form 10-Q filed with the Securities and Exchange Commission. With that, let me turn the call over to Tony. Tony?

Yeah. Thank you, Lucas, and good morning, and thanks for joining us today. I'm going to start my remarks on slide four. EMCOR delivered another outstanding quarter, highlighted by exceptional organic growth, strong conversion of revenue into operating income and cash flow, continued booking strength, and record remaining performance obligations or RPOs. These results reflect the consistent execution, operational discipline, and customer focus that have defined EMCOR's success over many years. Importantly, our strong performance during the first half of 2026, combined with the visibility provided by our record RPOs, supports a substantial increase to our full year 2026 earnings guidance. As we will discuss in more detail later in the call, we also continue to execute our balanced capital allocation strategy, returning significant cash to shareholders while investing in strategic acquisitions that strengthen our capabilities and deepen our position in attractive end markets to better serve our customers.

Let's go to the second quarter. In the second quarter, revenues were $5.15 billion, an increase of 19.8% over the prior year. Excluding the impact of acquisitions and the divestiture of EMCOR UK, organic revenue growth was 19.6%. Operating income reached $547 million, resulting in an operating margin of 10.6%, while diluted earnings per share increased by 35% year-over-year to $9.06 in the quarter. These results demonstrate the strength of our business model, the quality of our execution, and the sustained demand that we continue to see across many of our core markets. Electrical construction generated revenue growth of 24% year-over-year, while delivering an impressive operating margin of 13.9%. Mechanical construction achieved revenue growth of 31% year-over-year with a strong operating margin of 12.5%.

These results reflect our ability to execute complex projects across multiple geographies and trades and expand our scope with existing customers and consistently delivered value to our customers on mission-critical projects. Growth across our construction businesses continues to be supported by strength in several sectors. In the quarter, the largest revenue increases were generated in network and communications, which is where our data center business is, institutional, manufacturing and industrial, and warehousing and distribution within commercial. Our teams are leveraging industry-leading prefabrication capabilities, virtual design and construction technologies, which we refer to as VDC many times, disciplined labor management, and advanced project planning to execute these projects safely, efficiently, and productively for our customers. Our U.S. building services segment also delivered solid performance. Revenues increased 5.6% from the second quarter of 2025, while operating income grew 26.6%.

Our mechanical services divisions continues to perform exceptionally well, benefiting from an increased service base as well as customer investments in HVAC retrofits, control systems upgrades, indoor air quality improvements, and energy efficiency initiatives. In addition, the restructuring actions we implemented last year in our site-based services business are generating meaningful benefits through a leaner cost structure and a more profitable portfolio of contracts. Our industrial services segment generated revenue growth of 26% year-over-year, led by strong performance within field services, while also delivering year-over-year improvement in profitability. I'll ask you to turn to slide five. One of the most significant indicators of future growth continues to remain our RPO position. At quarter end, total RPOs reached a record $17.14 billion, an increase of 44% from the prior year, 29% from December, and despite the record organic growth in the quarter, 10% sequential growth from March.

Notably, 95% of this growth was organic. This record position provides visibility into future revenue and reflects the strength of customer demand across several sectors. Demand within the network and communication sector, led by data centers, remains exceptionally strong. We continue to see expanding opportunities as customers invest in AI infrastructure and digital transformation initiatives. Equally important, our RPO growth was broad-based with strong bookings in water and wastewater, healthcare, and the institutional sectors. Customers continue to place trust in EMCOR. As we successfully execute projects and we consistently meet our commitments, many customers are expanding across geographies and scope into facilities, geographies, trades, and other technical disciplines like our pre-construction. This ability to deepen relationships and grow alongside our customers remains a significant competitive advantage for EMCOR. With that, I'll turn the call over to Jason to go through the numbers.

Thank you, Tony. Good morning, everyone. Over the next few slides, I will cover the operating performance for each of our segments, as well as some of the key financial data for the second quarter of 2026 as compared to the second quarter of 2025. I'm going to start on slide seven. Revenues of $5.15 billion established a quarterly record for EMCOR, increasing 19.8%, or 19.6% on an organic basis when excluding acquisitions and adjusting for the sale of EMCOR UK. Each of our segments experienced meaningful revenue growth, contributing to our consolidated performance. Revenues of electrical construction were $1.66 billion, increasing 24%. While this segment did experience increased activity across a number of the market sectors we serve, the majority of its growth in the quarter resulted from greater data center projects within the network and communications market sector, where revenues increased by 45%.

Mechanical construction revenues of $2.3 billion grew by just over 31%. Similar to electrical, this segment experienced the greatest growth from the network and communications market sector, where revenues more than doubled year-over-year. Increased cooling requirements for data centers, coupled with our expansion into newer adjacent geographies, continued to drive more opportunities for this segment. Data centers, mechanical construction generated notable revenue growth from several other sectors in which we operate. Specifically, institutional revenues increased 77%, commercial increased by 26% due to resumption in demand for warehousing, distribution, and logistics projects, largely within fire protection, and manufacturing and industrial, including food processing, was up 18%. On combined basis, our construction segments generated revenues of $3.96 billion, an increase of 28%, establishing new quarterly revenue records for both segments. Moving to building services, revenues of $837.7 million increased by 5.6%.

Revenues of our mechanical services division increased by $30 million, or nearly 5%, driven by broad-based strength across each of their service lines. The segment's commercial site-based services division returned to growth, experiencing a $14 million, or roughly 11% increase in revenues due to the award of new facilities maintenance contracts, as well as scope or site expansion with existing customers. Like our construction segments, the performance of building services represents a quarterly record for revenues. Industrial services revenues were $353.8 million, reflecting an increase of nearly 26%, driven by our field services division, which benefited from greater turnaround activity, higher petrochemical project volume, and progress made on a large solar project. Let's move to slide seven for operating income. We generated operating income of $547.3 million or 10.6% of revenues, both of which are records for EMCOR for a second quarter.

Operating income increased nearly 32%, operating margin expanded by 100 basis points. Looking at each of our segments, operating income of electrical construction increased by 46.8% to a quarterly record of $231.4 million due to the revenue growth I previously mentioned, coupled with 210 basis points of operating margin expansion. While the segment did benefit from a 20 basis point reduction in SG&A margin, the vast majority of the increase in operating margin was a result of greater gross profit margin, given exceptional field execution and a more favorable project mix. Mechanical construction had operating income of $286.6 million, which represents a 20.1% increase. As with electrical, operating income for this segment represents a quarterly record. Although down 110 basis points, mechanical construction earned a solid 12.5% operating margin, which is in line with the segment's average margin over both the last 12-month and 24-month periods.

Similar to the first quarter, and very much as we anticipated, the reduction in operating margin of this segment resulted from a shift in mix that included a greater percentage of revenues from projects where we are acting as either the construction manager or prime contractor, and which inherently carry lower than average gross profit margins due to reduced markups on materials, equipment, and subcontractor costs, as well as an increase in the number of GMP or cost-plus contracts. Together, our construction segments grew operating income by over 30% and earned a combined operating margin of 13.1%, an increase of 30 basis points. Building services generated operating income of $63.4 million, an increase of 26.6%. In addition to the impact of greater revenues, the segment achieved 130 basis points of margin expansion, with operating margin reaching an impressive 7.6%.

Given a more favorable project mix coupled with improved execution, gross profit margin increased by 70 basis points, and due to the restructuring actions we completed within our site-based businesses, SG&A margin decreased by 60 basis points. Operating income for industrial services was $9.6 million, a significant improvement versus the year ago period, driven by the increased revenues I previously mentioned. If we turn to page eight, I'll quickly cover a few highlights not included on the previous slides. Gross profit of $1.02 billion increased by 22.6%, and our gross profit margin of 19.8% increased by 40 basis points. While all of our operating segments contributed to the greater gross profit dollars, the improvement in gross profit margin resulted from the performance of electrical construction and building services, as I just highlighted.

SG&A was $475 million, or 9.2% of revenues, compared to $418.6 million or 9.7% of revenues a year ago. While revenues grew nearly 20%, we attained meaningful operating leverage during the quarter, with SG&A increasing by only 13.5%, resulting in a 50 basis point reduction in quarterly SG&A margin. Lastly on this page, diluted earnings per share was $9.06, which represents an increase of nearly 35% when compared to the $6.72 earned in last year's second quarter. If we briefly look at slide nine, you can see the strength of our performance for the first half of the year. Revenues have grown by 19.7%, or 18.3% organically, our gross profit margin has improved by 30 basis points, and we successfully leveraged our overhead cost structure, reducing SG&A margin by 50 basis points.

This resulted in operating income, which has grown by nearly 30%, along with a record operating margin of 9.7%. Let's turn to slide 10. Our balance sheet, including $924 million of cash on hand and $1.45 billion of working capital, continues to provide us with a competitive advantage, and enables us to fund organic growth, pursue strategic M&A, and return capital to shareholders. All of which you'll see on the next two pages. Although not shown on this slide, we did generate $289.4 million of operating cash flow in the quarter. On a year-to-date basis, our operating cash flow is now relatively comparable to that of the year ago period, despite our growth and the associated increase in working capital. With that, I'll turn the call back over to Tony.

Thanks. I'm going to go to page 11. This is a great page by the way. Before I get into the guidance, Jason and I are going to talk about the acquisitions and capital allocation. I want to briefly highlight on this page some of our business development activity. We continue to execute our acquisition strategy with a focus on transactions that expand our capabilities and strengthen our core competencies. These acquisitions deepen our trade and technical expertise and broaden our geographic reach to better support our customers in our fastest-growing sectors. These acquisitions actually showcase our playbook and mindset with acquisitions. We look to create a cumulative and compounding impact with our acquisitions that provide durable performance. We know that we have both cost and revenue synergies in an acquisition.

In these cases, most of the cases over the last five, eight years, our revenue synergies that we create far outweigh the cost synergies over time. If you like each of these acquisitions in turn, B&B Electric provides us really good capability in Wisconsin. They are a good industrial contractor that can do highly complex work. Sidney Electric in Sidney, Ohio, complements the capability we have in Ohio that came through our Quebe acquisition over five years ago. We learned with things like Sidney, who are great industrial contractors and can do healthcare work, that we can pivot them if the data center opportunities become available, we can grow them pretty significantly. Giles Electric was actually acquired with our Miller Electric Company team and provides access to the Daytona Beach market, will allow us to go down through the growing space market in Florida.

Schmidt Electric, a market leader in Central Texas and Austin. It opens up that market to us. They have the ability to do data center market, that's where we're going to be able to bring some real capability. They can do the most complex work known, we've learned that they can pivot into data center work through our customer relationships. Keep the base, grow that, put the data centers on top of it. Likewise, Connelly Electric, we have great businesses in Chicagoland area. This is purely complementary in the locals they operate. There too, great contracting ability. They bring a design-build capability we don't necessarily have on some warehousing and logistics work, we think we can pivot them. We know we can pivot them also to the expanding data center market in the southern and western Chicago suburbs. We feel really good.

I'm going to let Jason go through. What's important about all this, you look at this page and they're just names on a page, right? Each one of them have a story of a great operator or a great operating family that have owned the businesses for a long time, now they've trusted us to take that with them. They're still going to be here. With them, take these businesses to the next level with how we know to grow our customer relationships, we're going to learn from them, too. We talked about the design-build capability, some of the pre-fabrication techniques that they have on specific products.

This is a two-way street, I know we feel the pressure to continue to build and make these companies successful, as now up to 70 years in some cases, family legacy and ownership legacy have now entrusted us to take it to the next level, and we don't take that lightly. With that, I'll turn it over to Jason.

As Tony noted, these businesses will all be included in our electrical construction segment, and we do anticipate funding the acquisitions through a combination of cash on hand and to the extent necessary, the borrowing capacity provided by our credit facility. The slide shows here that these five businesses collectively generated $625 million of revenues and $105 million of EBITDA during the trailing 12 months ended June 30th. When considering the closing dates for Schmidt and Connelly, which collectively represent approximately 75% of the aggregate revenues and EBITDA presented, our guidance, which Tony will discuss shortly, assumes between $250 million and $275 million of revenue contribution from these five acquisitions in the back half of the year. Given the anticipated intangible asset amortization as well as the reduction in net interest income, the impact to diluted earnings per share will be limited for the remainder of the year.

As backlog amortization rolls off over the succeeding 12-18 months, these acquisitions will provide further accretion as supported by their margin profile. If you look on slide 12, we provided a summary of our capital allocation both year to date as well as over the past 10 years. As that slide shows, we remain committed to our philosophy of balanced capital allocation. When you factor in these pending acquisitions, we expect the mix for full year 2026 to be comparable to that of full year 2025 as the percentage deployed towards M&A increases. I'll turn the call back over to Tony for our updated guidance.

Thanks, Jason. I'm going to be on page 13 to close this out. Given our strong first half performance and the visibility provided by our record RPO position, we're going to raise full year 2026 guidance, which is outlined on page 12. Our updated guidance reflects continued demand across several key markets, our success in winning and executing large scale projects, and our confidence in the operational capabilities of our teams. As a reminder, while acquisitions strengthen our long term earnings power, as Jason just said, the earnings contribution near term on a diluted EPS basis remains moderated by acquisition related backlog amortization. We now expect to earn revenue of between $20 billion and $20.5 billion and diluted earnings per share of between $32 and $33.25. Our outlook assumes strong continued operating performance and margins, disciplined project execution, and sustained demand across our core market sectors.

We remain focused on maintaining pricing discipline, carefully selecting opportunities, and delivering those opportunities to provide exceptional value to our customers. I've said these things before, and I always think they merit reiterating. We have four enduring fundamentals that we build our company on. First, our commitment to training, innovation, and safety. We continue to invest in workforce development, pre-fabrication, virtual design and construction, or VDC, project delivery methods that improve productivity and strengthen execution. Second, our disciplined approach to contract management. Our teams consistently balance customer service with prudent risk management, particularly on large and complex projects. Third, we do have exceptional field leadership. The dedication and expertise of our foremen, superintendents, project managers, project engineers, and operating leaders at the subsidiary level and segment level remain an important differentiator for EMCOR and a major reason why customers continue to choose us. Finally, disciplined capital allocation.

We continue to invest in organic growth, execute strategic acquisitions, and return capital to shareholders, creating long-term value while maintaining financial flexibility. Together, these strengths create a durable competitive advantage and position us for continued success. I put this line in here, this paragraph in here all the time. I don't know when there hasn't been macroeconomic uncertainties. They continue to exist, including geopolitical conflicts, commodity cost fluctuations, equipment lead time volatility. However, our teams have always repeatedly demonstrated their ability to manage through such complexity and deliver results. We enter the second half of 2026 with strong momentum and confidence in our ability to continue creating value for our customers and our shareholders. Finally, and probably most importantly, I want to thank all my teammates for their commitment to safety, disciplined execution, and customer service.

Your dedication is what continues to drive EMCOR's performance and our long-term success. Thank you for joining us today. With that, I will turn the questions over to Dave to open the line so that you can ask Jason and I innumerable questions about data centers. With that, I'll turn it over to Dave.

We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. Our first question comes from Adam Thalhimer with Thompson Davis. Please go ahead.

I'm going to try not to ask about data centers.

Good. I actually wanted to ask more in the semiconductor space, which maybe that's the high-tech manufacturing. Can you talk about any bookings in the quarter or upcoming bids in that sector?

We continue to see opportunities there. Fire life safety has been particularly strong in the data center space. Mechanically, we're doing some important work in Arizona, on top of the fire life safety work. We're doing that in multiple locations. We continue to see opportunities. We're very capable in that market. It's always balancing those opportunities versus other opportunities. For us, high-tech manufacturing also includes pharma and biotech and EV battery. Jason?

I think if you look at where we stand today versus both year-end and sequentially, from March, we've had strong bookings. Our RPOs are up in that space about 7%, both sequentially and from year-end. I think the compares get a little bit easier for us as the year goes on. As we continue to book some of this work and the completion of the first phase of semiconductors is behind us in prior years, I think you'll see some growth here either later this year or early next year.

We are fire life safety, I think, on just about every important site that's being built right now. Mechanically, we're on a couple of them, and electrically, on some of the low voltage work, we continue to do the work also. Like anything else in contracting, you're balancing that opportunity versus other opportunities in that geographic market. In some places, the data center market might be stronger and provide us more near-term earnings power. We can always go back and do some of that semiconductor work in some of these markets.

Got it. Okay, super helpful. With all the acquisitions, a lot of other contractors entering your end markets via acquisition, I thought maybe it'd be helpful for you to just break down how your capacity, the machine that you guys have built over decades, compares to some of the competitors out there.

Yeah, I think for the most part, the page 13, 11?

11 is a great example of our machine in action, that machine will continue. First thing we look for is can they execute in the field? We're not doing anything different today than we were doing five years ago or eight years ago. Doing a little more, a little larger, but can they execute in the field? If they can't execute in the field, whether they're a $5 million acquisition or a $400 million acquisition, we're not touching it. The second part is, do they share our values? The smaller ones, that's hard to $10 billion acquisition, maybe that's less important because we're going to mold that into one of our existing operations. If we're going to do a significant acquisition, like some of the ones on page 11, they got to look at the world the way we do. We're a values-driven company.

We have a disciplined operating model, they have to be willing to share learning and be willing to accept learning and best practices. That hasn't changed. When you look at others in the space, I don't know how they do acquisition or whatever, but to buy into this space cold and not know how it operates and think you're going to generate synergy, here's some things I do know over a long period of time. Other than the relationships, like that does help. Bundling mechanical and electrical together at a local site. We are plenty of sites where we're together. We don't very rarely combine a bid. That's not a thing, putting all the trades together, typically.

The other thing I know I'm pretty sure about is, no one's asking the contractor that's doing the utility work to now do the data center work because you're doing the utility work. I'm pretty sure the site contractor is not the electrical contractor of choice because they did the site work. These trades are very distinct with strong expertise, and I would say that going to remain that way for a long time. We're looking for people that are very good at what they do.

In some of them, we think we have substantial growth because what we've learned over time, especially the sort of mid-size $50 million-$100 million contractor, if they can do complex work, if they've been working in industrial plants, if they've been working in healthcare facilities, and let's say there's a data center adjacency with a relationship we have, we're pretty sure we can put them in the data center market in addition to that. Our folks have been great about sharing knowledge, and that knowledge starts all the way back or how you're going to estimate it, how you're going to bid it, what are the contractual negotiations look like, all the way through to how do you set up the VDC models, how does that work, all the way through to means and methods in the field.

What we've learned through time, we learn a lot from our acquisitions on means and methods, and we learn a lot from them on basic project planning and labor, and they learn a lot from us. Overdrawn, but just thought I'd give you some highlights.

I also think quickly, if you look at that package of acquisitions we put together. The thing that sets this apart is they're fairly diverse, both in terms of geography, when you look at them together, and markets they can serve. I think that diversity gives them the opportunity to grow similar to the way EMCOR has grown over the last several years.

The next question comes from Brent Thielman with Oppenheimer. Please go ahead.

Hey. I guess first question, the mechanical margin comparisons obviously reflects some mix effects, which always seems to be the case, Tony. Jason, I think you mentioned performance as a prime and higher proportion of cost-plus contracts as some of the factors in the quarter. Is there any sort of change in philosophy here with that business or just something more nuanced in the quarter?

No. We talked about this in Q1 as well, Brent. It's very much some of the water and wastewater work that we're doing, some of the food processing work that we're doing. We had more bookings in that space. We had more revenue coming through from some of those contracts, and so it's just a little bit dilutive to margin. It really is more of mix and project-based than anything else.

Yeah. 12.5% is outstanding performance, and we're executing really great across a number of end markets and a number of projects.

Yeah. I think that those dynamics remain throughout the rest of the year, but I don't think it's an indication of a philosophical change in terms of what we're getting.

We're going to run the business the way we always have.

Okay. You mentioned with a few of these transactions, maybe some plans to pivot some or more of their business toward kind of the data center opportunities that might be within their kind of respective territories. Obviously, you bring the customer relationships to the table, could you just talk about the capabilities of these operations to do that work? Is it going to require more resources from you to do that effectively? I guess, what gets you comfortable with those businesses potentially pivoting toward that kind of business?

We've done it internally multiple times. We've taken existing EMCOR companies, that have the same profile of these companies, and we've done it with acquisitions already. In Ohio, that's the best example. Existing EMCOR companies that have the exact capabilities, the exact kind of mentality that these folks have, and we've been able to pivot them pretty successfully into both high-tech manufacturing and the data centers. These are good businesses in their own right, serving the markets that they serve, like Jason said. That's what makes this exciting, where there's an opportunity to add growth because of the things you identified, and we're pretty sure we can do that. Now what we do is, do we implant a couple of our folks at the field level to help them initially? Sure. Do we help them on the front end to make sure the numbers are right? Sure.

Do we help them with contract negotiation? All those things are true, but ultimately, they got to have great field execution, great field supervision to be able to pivot and grow their business with us in those markets.

Appreciate it. I'll pass it on. Thank you.

The next question comes from Justin Hauke with Baird. Please go ahead.

Yeah, I've got two here. I guess first one, just clarifying, and I'm assuming it's probably the case, but the acquisitions, are these all still union contractors, like your typical electrical construction markets or is it a mix?

Yes, they're all union. IBEW contractors.

Okay. I figured they were. I guess the other question I had was just I wanted to understand the dynamics on raising the margin guidance. Obviously, Electrical was really strong here, and I know you guys don't manage to margin. You manage to gross profit and risk and everything else. With the Mechanical drag and then the incremental amortization from these deals, I guess I'm just surprised that the guidance was raised, given you've been relatively conservative on that. Just can you walk through what's different that drove that?

I think one of the biggest factors is you can see the acceleration we've had in revenue, and that revenue acceleration is really absorbing a lot of overhead, both some of our indirects within cost of sales and then just SG&A. With that revenue growth, we're getting better absorption, we're getting better SG&A leverage. We said all along, this is really going to be a revenue story for us if there was upside. With that new revenue guidance, we feel better about the operating margins because we're going to continue to see that absorption. To your point, we had really, really good execution from Electrical, and then we saw greater contribution from Building and Industrial. When you look at the first half of this year, we see no reason why the back half shouldn't look like the first half.

The next question comes from Avi Jaroslawicz with UBS. Please go ahead.

Yeah, the really strong electrical margins here in Q2, just wondering if there was anything more unique that drove that strength, or was it really more just everything going right?

Well, I don't know if everything went right, but what it is, it's just the ebb and flow of the business. At a good point in the business, we always talk about margins in bands, and we're at a pretty good place. We're at the midpoint of what that band would be right now. We always say, margins will fluctuate quarter-to-quarter, but in our guidance is pretty strong performance for electricals for the remainder of the year.

Okay. Yeah, I was wondering if, I know last quarter we spoke about how there was contract mix that was kind of restraining some of the margin percentages, and so I was wondering.

Got you. Okay. Just thinking about the second half of the year, and I know margins move in bands, and this was a nice quarter, but is there any potential that we could see them stay in kind of the 10%+ range, or is that not realistic?

If you look at our guidance, right, the way we're looking at it is this was a phenomenal quarter. I think you really need to take the first half of the year together. If you look at our guidance, effectively, if you take the low end, what we believe can happen, take low revenue, low EPS, the implication there on margins is that it's really comparable to the back half of last year. If you take the midpoint revenues, midpoint EPS, the implication there is that the back half of this year looks like the first half of this year. The higher end of that guidance implies that we continue to see some better execution, we continue to get more SG&A leverage. I wouldn't suspect that, and certainly not baked into our guidance, is that this 10.6% margin repeats.

It's more like the first half of the year collectively.

There's some seasonal things that work against that, too. Second quarter's always a strong building services quarter. There was a stronger industrial services than we typically have. Look, I think when you look at industrial services, we talked about the geopolitical risks. It has nothing to do with the business, but the refiners can't shut down for the most part in any substantial way in the back half of the year. We had a pretty good turnaround season in February, March. I think that turnaround season will not be as strong as it normally can be, because of what's happening in the Middle East, because they have to keep open and keep producing oil and gas. It's a small impact on margins, but it's likely to impact margins in the fourth quarter.

Okay. Understood. Appreciate the time. Thank you. I'll pass it on.

The next question goes to Brian Brophy with Stifel. Please go ahead.

Yeah, thanks. Good morning, everybody. Congrats on the great quarter. I'll ask a data center question. Obviously, public market investors seem concerned about something as it relates to data centers, but just curious, your discussion with your customers, have you seen any change at all in the demand profile from that end market? Thanks.

Yeah. Short answer, none. The demand profile remains the same. I do think there are some places we're going to build more, right? I think Ohio, Texas, Pennsylvania is a burgeoning market. Arizona's been a strong market. Northern Virginia will continue to be strong. We have less of a share of them because just the law of large numbers. Other places are building them. Northwest Indiana and Chicagoland continue to be important markets. Arizona, and then Georgia, and the Carolinas. They all have one thing in common. They have power and are willing to build power. The sort of not in your backyard thing, that's going to get play. It's the same people that were against fracking. They really don't want data centers because they don't want natural gas to continue to expand. What has to expand is natural gas to keep this going.

If you look at, we've done some work on power and where power is going to become available and all that. We are in really good shape to continue to serve those markets. It's sort of laughable that New York put a data center ban on because there's really nothing materially happening in New York with data centers anyway.

Yeah, that's great color. Question on the GMP mix, I know some attention, in terms of your contract mix, can you give us a sense of how much has actually shifted to GMP versus fixed price? Are we talking hundreds of basis points, thousands of basis points? Can you just give us a sense of the overall percent mix there?

It's probably shifted mechanical 9%-10%, which can be meaningful because they're large contracts. Go back to the point I make about careful contract negotiation. A lot of that's driven by the owners, and a lot of that's driven on the mechanical side because these mechanical systems a lot of times are being done for the first time or they're fairly complex. A lot of that GMP mix that's shifted, there's always been an element of more GMP in mechanical, but the shift is really coming into the AI data centers. That's prudent both from the end customer, the owner, and that's prudent from us to be taking those contracts that way.

The next question comes from Tim Mulrooney with William Blair. Please go ahead.

Yeah. Thank you. Good morning. I have two questions. My first one is kind of building on your last conversation around state moratoriums and data center bans. As we think about some of these proposals in place at the state and local level, and they're just mostly proposals at this point. Can you help us think about how flexible and transportable your labor is when it comes to these types of projects? Are there enough of these projects in the works where you can have people drive a few towns over, or do you have to house these workers in new states, depending on where these projects are moving forward? Curious about your ability around labor capacity and flexibility. Thank you.

That's one of the benefits of being a union contractor. Because of the demand in some of these states, there's a capacity to bring in people from. They will travel themselves. It's not us sort of housing them. They get paid per diem. They find a place. It could be as simple as the folks in Chicago, some of the labor moving up to Northwest Indiana, to do the work. That local gets built up, and they take more of the work. That's one of the benefits. They come in with a level of sophistication. We know what their capabilities are. They check into the local union hall, and we go to work. We can help facilitate that in some cases. There's that's the more traditional way of doing it.

You get to some of the rural markets where we're participating in, whether it be in some of the rural Midwest markets is take Texas. We're finding creative ways to serve Texas, whether it's through more pre-fabrication on the job and then subcontracting some of the installation or doing it ourselves. If you're going to do union, in some cases, you'll permit non-union people to be union for a short period of time and use that capacity. Finally, there are opportunities for some non-union operations that we may have to participate in very rural markets that look a lot more like how the oil and gas people work than how a traditional IBEW or a commercial contractor will work. You have to be flexible and do all the above, mainly it starts with the tradespeople themselves being flexible and looking for the work.

I think about these moratoriums. We've done some work on that. We're by far, we're not lobbyists, we're not experts. When you start to see the level of tax revenues that come into some of these counties, like Loudoun County, Virginia, 95%, I think, of the property receipts are now from the data center people. Pretty hard to take a step back when that's been driving your local tax base and your education systems. We think there's plenty of opportunities. At the end of the day, when we talk to the owners, they're going to find the places that build them, and we are well-positioned to do that in the places where they are going to build them.

I appreciate that extra color there, Tony, on the moratoriums too. It's interesting dynamic that's happening right now. Switching gears, wanted to ask about your backlog, your RPOs. As I look at this, I look at your one-year RPOs to be completed within a year. It typically represents about 50% of your next 12 months revenue. That was true every year, basically for the last four years, plus or minus a percentage point or two. It's basically 50%. In a very tight range. Is there any practical reason, and I don't know, but is there any practical reason that you could think of for why that might not be the case anymore?

No, I can't think why the future doesn't look like the past, Jason.

Yeah, I think the one thing we have to just weigh as well is we've booked a lot of work in the last two quarters, I think some of it will be the timing of ramp-up and the timing of mobilization. If you're looking at growth rates in RPO versus growth rates in guidance, there's obviously a disconnect. Our RPO is growing a little bit faster than we're saying our revenues are going to grow. Some of that is just the timing of mobilization with the level of work we've booked over the last two quarters.

Within a band, you're probably about right. How we think it's a little different when we come into the year, Jason, we usually think we have about 55%-65% of our work booked.

It used to be that we'd have to go and book and earn 60% of our annual revenue in that year. That percentage has dropped dramatically. It dropped to 50%, 45%. I think this year it was 40% of the revenue we had to go book and earn. I think that's the new norm right now. We do have some projects that are skewing out a little bit longer. Historically, we would say that 85% or so of our RPOs burn in 12 months. Where we're sitting today, it's more like 75% or 76%. Some of that's the water and wastewater mix. Some of it's just the volume of bookings we've had.

Project size, 100%. That's been increasing, if you look at the last two years, there's really no big shifts going on here.

The next question comes from Manish Somaiya with Cantar. Please go ahead.

EMCOR Group (EME) Q2 2026 Earnings Call Transcript

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