With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

AI is a major force shaping this year’s list—but it’s far from the only story.

World's Most Admired Companies

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

America's Most Innovative Companies

Leaders in all industries rely more than ever on Big Tech—and appreciate the giants that deliver, at scale, without drama.

Industries included in the sector are construction and engineering services and homebuilders.

Fortune Sector Leaders: Engineering and Construction

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

The construction and engineering company started in 1994 and has quickly grown through acquisition and expansion into new markets. It's now comprised of over 80 operating companies.

This year's Fortune 500 marks the 66th running of the list.

Based in Norwalk, Conn., Emcor provides critical infrastructure systems for construction, building, and industrial applications. The company's 33,000 employees plan, install, operate, maintain, and protect the myriad systems—electrical, mechanical, lighting, air conditioning, heating, security, fire protection, power generation—in a facility environment.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 64th running of the list.

Here are the World's Most Admired Companies for 2017 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 63rd running of the list.

Here are the World's Most Admired Companies for 2016 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Sector

Culture rank

Process rank

Product rank

Years on list

Previous rank

Industry

Current All-Star Rank

Previous All-Star Rank

Industry Rank

Previous Industry Rank

Overall Score

Innovation

People Management

Use of Corporate Assets

Social Responsibility

Quality of Management

Financial Soundness

Long-Term Investment Value

Quality of Products/Services

Global Competitiveness

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

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.

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

Q3 2024

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

legacy

EMCOR Group

emcor group

My name is Chris and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group third quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' prepared remarks today, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. At this time, I would like to turn the call over to Lucas Sullivan, Director of Financial Planning and Analysis. Mr. Sullivan, you may proceed.

Thank you, Chris. Good morning everyone and welcome to EMCOR's third quarter 2025 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 third quarter and discuss our RPOs. Jason will then review the third quarter and 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 contain 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.

Thanks Lucas and welcome to the call. I'm going to be on pages four through five of our presentation. Good morning and welcome to our third quarter 2025 earnings call. I'm going to cover the financial highlights for the third quarter and then provide commentary on what has gone well through the first three quarters of this year, which has been a lot. Jason will cover the quarterly financial results in detail. We had another strong quarter at EMCOR. We earned $6.57 in diluted earnings per share and generated revenues of $4.3 billion, which represents a 16.4% increase from the prior year period. We achieved an exceptional operating margin of 9.4% and had strong operating cash flow of $475.5 million.

For the third quarter, we had a book to bill of 1.16 with Remaining Performance Obligation at a record $12.6 billion, which represents an increase of $2.8 billion year-over-year and $2.5 billion from December of 2004. We continue to allocate capital with discipline. For the first nine months of 2025, we allocated just over $430 million on share repurchases and utilized $900 million for acquisitions. Our balance sheet remains strong and liquid, providing the fuel to support our growth and capital allocation strategy. What's driving this outstanding performance in the first three quarters of 2025? Our electrical and mechanical construction segments continue to earn impressive operating margins and generate growth in their base of business as demonstrated by increasing both revenue and RPOs across a number of key sectors.

We execute well for our customers in these segments by using VDC, BIM, and prefabrication, coupled with strong planning, excellent labor sourcing and management, and disciplined contract negotiation and oversight. We have managed our project mix well and continue to gain the confidence of our customers across geographies and diverse market sectors. With respect to data centers, we continue to improve our capabilities to serve an increasing number of data center sites with multiple trades and across a diverse set of customers. As I have said before, we are known for having the best field leadership in the business and they operate with focus, discipline, humility, and grit. Our mechanical services business in our U.S. Building Services segment continues to execute well with revenue growth of nearly 6% in the quarter and 7% year to date and an operating margin in the high single digits.

The impact of the successful restructuring in our site-based businesses is reflected in this segment's third quarter operating margin expansion. Our Industrial Services segment had some demand headwinds during the year as some large turnarounds were moved into the fourth quarter or further into 2026. Lastly, we had a successful third quarter in our U.K. Building Services segment. In September, we announced the sale of our U.K. business and believe that we will complete this transaction by year end as we await U.K. regulatory approval. EMCOR U.K. has a very talented management team and they will serve their new owners well and we will miss them. Overall, we had another strong quarter and a robust performance year to date in 2025. Now I'm going to turn to the RPO section. As I previously mentioned, we leave the quarter with a diverse and strong set of RPOs at $12.6 billion.

Due to the growth in the majority of the sectors we serve, our RPOs have increased 29% year-over-year and 25% when compared to December of 2024. On a sequential basis, RPOs have increased 6% from June to September. Long-term secular trends across key sectors continue to support this growth, driven by robust data center demand. RPOs within network and communications totaled a record $4.3 billion at the end of September, almost double that of the year-ago period. While acquisitions have added to our data center capabilities and allow us to serve our customers in additional geographies, over 80% of our RPO growth we have seen in this space during 2025 has been organic. Healthcare RPOs totaled $1.3 billion.

While the healthcare sector has always been core to EMCOR, the acquisition of Miller Electric has expanded our opportunities in this sector, contributing to the nearly 7% RPO growth we experienced year-over-year. Manufacturing and industrial RPOs total $1.1 billion. In addition to demand driven by customers' onshoring and reshoring initiatives, recent growth in this sector has also benefited from the award of certain food process projects within our mechanical construction segment as well as a renewable energy project within our Industrial Services segment and led by our mechanical construction segment. Water and wastewater RPOs increased by over $300 million during the quarter and now total $1 billion as we continue to win projects throughout Florida.

Although RPOs within high tech manufacturing have decreased from September of last year, we continue to believe in the long term fundamentals of this sector, while acknowledging that award of these projects can be episodic in nature or impacted by our resource allocation decisions as we seek to deploy our workforce in a manner that achieves optimal outcomes for EMCOR and our shareholders. With that, I will gladly turn the presentation over to Jason to cover our financial results in detail.

Thank you, Tony, and good morning, everyone. As Tony mentioned, over the next several slides I will review the operating performance for each of our segments as well as some of the key financial data for the third quarter of 2025 as compared to the third quarter of 2024. I'll start on Slide 6, which is revenues with growth of 16.4%. Revenues of $4.3 billion set a new company record for a third quarter. Acquisitions contributed $306.6 million, with the largest incremental revenue coming from Miller Electric. On an organic basis, revenues grew by 8.1%. We experienced growth within all of our reportable segments, and demand for our services continues to be strong across most of the sectors that we serve.

If we look at each of our segments, revenues of U.S. electrical construction were $1.29 billion, increasing 52.1% due to a combination of strong organic growth and the acquisition of Miller. Consistent with our commentary over the last several quarters, while we continue to experience greater data center demand, growth within this segment remains broad based as increased revenues were generated from nearly all market sectors. In addition to network and communications, where revenues grew by nearly 70% year-over-year, electrical construction saw notable growth in commercial, healthcare, institutional, and transportation. This once again demonstrates the broad offerings of this segment. Revenues in electrical construction also benefited from higher levels of short duration projects and service work due in part to the capabilities we've added through the Miller acquisition. 

Revenues of U.S. mechanical construction were a record $1.78 billion, up 7% almost entirely through organic growth due to greater demand for data center construction projects. This segment saw the largest increase from the network and communications market sector where quarterly revenues nearly doubled year-over-year. Beyond data centers, greater revenues were generated from several other market sectors with the most notable increase within manufacturing and industrial led by food processing construction projects. Partially offsetting the revenue growth of the mechanical construction were decreases within high tech manufacturing as we completed certain semiconductor construction projects and commercial due to less warehousing and distribution project revenue. While we are starting to see some resumption in demand from our e-commerce customers, we are just beginning to ramp up on these projects. On a combined basis, our construction segments generated revenues of $3.1 billion, an increase of 22.2%. 

Looking next at U.S. building services, revenues of $813.9 million reflect a 2.1% increase year-over-year. This marks the second quarter of revenue growth since the loss of site-based contracts that we've previously referenced. Similar to the second quarter, the growth in mechanical services exceeded the revenue decline within site-based and driven by each of its service lines. Our mechanical services division generated revenue growth of 5.8% in the quarter, all of which was organic. Turning to our industrial services segment, revenues of $286.9 million are in line with that of the year ago period. Decreased field services revenues as a result of the completion of a large renewable fuel project were offset by an increase in shop service revenues, primarily due to greater new build heat exchanger sales. Lastly, U.K. building services generated revenues of $136.2 million, which represents an increase of $29.8 million or 28.1%.

Favorable exchange rate movements did positively impact the segment's revenues by $4.8 million. Growth was largely driven by the award of recent facilities maintenance contracts by new customers and increased project activity with existing customers. If we turn to Slide seven for operating income, we generated a record third quarter operating income of $405.7 million and earned a very impressive 9.4% operating margin. Looking at each of our segments, U.S. Electrical Construction had operating income of $145.2 million, which represents a nearly 22% increase. As a result of the revenue growth I referenced, this segment experienced greater gross profit across the majority of the market sectors in which we operate, resulting in the increase in operating income. While down from the unprecedented 14.1% earned in last year's third quarter, the segment's operating margin of 11.3% remains strong, reflecting the overall performance and execution by our companies.

In addition to incremental intangible asset amortization, which reduced operating margin by 90 basis points, operating margin in the quarter was impacted by lower profitability on certain projects in new geographies where we encountered reduced labor productivity while investing in the development of a workforce. Operating income from U.S. Mechanical Construction of $229.3 million increased by 6.7% in line with the growth in segment revenues, while operating margin of 12.9% is comparable year-over-year as we continue to execute well across our project portfolio. Together, our construction segments grew operating income by 12.1% and earned a combined operating margin of 12.2%. U.S. Building Services generated operating income of $59.4 million, an increase of 6.9%, and expanded operating margin by 30 basis points to 7.3%.

In addition to the increase in revenue, the operating performance of the segment benefited from a reduction in SG&A margin as we are beginning to see the impact of the restructuring we recently completed within our site-based business. Moving to Industrial Services. Despite revenues which were relatively consistent year-over-year, operating income of this segment nearly doubled due in part to a more favorable mix given a greater percentage of higher margin shop services work. Lastly, U.K. Building Services earned operating income of $7.6 million or 5.6% of revenues. The increased profitability of the U.K. business was due to greater gross profit stemming from increased revenues, a more favorable project mix, and effective cost management which resulted from the leveraging of their overhead during a period of growth. If we move to slide eight, I'll cover a few highlights not included on the previous slides.

Gross profit of $835.3 million has increased by 13.7% and our gross profit margin for the quarter was 19.4%. SG&A of $429.6 million increased by $58.4 million, while our SG&A margin remained consistent year-over-year at 10% of revenues. Accounting for nearly two thirds of the increase in SG&A was $32.2 million of incremental expenses from acquired companies and $5.7 million of incremental intangible asset amortization expense. Excluding these items, SG&A grew by $20.5 million largely due to employment costs as we continue to invest in headcount to support our organic growth and we experienced some increased incentive compensation within certain of our segments given higher projected operating results. Finally, on this page, diluted earnings per share was $6.57 compared to $5.80, an increase of 13.3%.

If we look briefly at slide nine, this slide summarizes our results for the first nine months of 2025 with year to date revenue growth of 15.5% and operating margin expansion of 20 basis points or 30 basis points when you exclude the impact of the transaction costs incurred earlier this year. Our performance for the first three quarters set a number of new company records. In a later slide, Tony will outline our updated earnings guidance for 2025. As I've done in the past, I mention that now as this guidance reflects continued strength in our margins.

Specifically, at the low end we have assumed a full year operating margin which is equal to what we have earned year to date, while the high end reflects what we could achieve if we produced an operating margin in the fourth quarter equivalent to the record margin we earned in Q4 of last year. Let's move to slide 10, which is our balance sheet with cash on hand of $655 million and working capital of $878 million. Our balance sheet as of September 30th remains strong and liquid, positioning us well to continue to deliver for our customers and shareholders. Although not shown on the slide, during the quarter we had operating cash flow of $475.5 million and have generated $778 million year to date.

For the full year, we continue to estimate that operating cash flow will be at least equal to net income and approximately up to 80% of operating income. Given our strong operating cash flow during the quarter, we repaid the $250 million that was previously outstanding under our revolving credit facility. Before I turn the call back over to Tony, I just want to quickly look at slide 11, which summarizes the pending divestiture of our U.K. business. As Tony mentioned and we previously announced, we have entered into an agreement to sell EMCOR U.K. for approximately $255 million. This transaction, which we anticipate will close prior to the end of the year, sharpens our focus on core end markets throughout the U.S. while supporting our balanced capital allocation strategy.

Proceeds will be used to pursue further organic growth and strategic M&A with a focus on electrical and mechanical construction as well as mechanical services, while also returning capital to our shareholders. Due to the size of the U.K. business, this transaction will not be treated as discontinued operations and as a result we will retain the revenue and earnings that have been generated by the business through the close of the transaction. Therefore, while EMCOR U.K. currently provides us with approximately $500 million of annual revenue and $0.45 of diluted EPS, the impact in the current year will be limited to the portion of 2025 that we no longer own the business.

This has been reflected in the updated earnings guidance which Tony will share with you and when providing our Q4 results, we will adjust for transaction expenses and any gain from sale as those items are excluded from our guidance. With that, I will turn the call back over to Tony.

Thanks, Jason. We've been executing very well, and as a result, we will tighten our 2025 revenue and earnings per share guidance. Specifically, we're updating our full year 2025 revenue guidance to a range of $16.7 billion-$16.8 billion from a previous range of $16.4 billion-$16.9 billion. This reflects the momentum we have seen in the business while adjusting for the anticipated sale of the U.K. segment. We are also narrowing our guidance for non-GAAP diluted earnings per share to a range of $25-$25.75, reflecting an increase of $0.50 at the low end and $0.25 at the midpoint. In order to continue to earn strong operating margins, we will need to continue to execute with discipline and efficiency for our customers.

I always remind our investors that this is not a quarter-to-quarter business with respect to operating margins, and the past four to eight quarters on average reflect the underlying margins. In our business, there remains momentum and demand in key sectors, especially in data centers, traditional and high tech, manufacturing, health care, water and wastewater, HVAC service, building controls, and retrofit projects. Macroeconomic uncertainty always exists, especially around tariffs, trade, and now we have the government shutdown again. We believe our guidance reflects the potential impact of such uncertainty as we view it today. We will remain disciplined capital and resource allocators. Our strong balance sheet bolsters our ability to execute a healthy pipeline of acquisitions and also robust opportunities to invest in our organic growth and return of cash to shareholders through dividends and share repurchases.

When we talk about resource allocation, we work to maximize our opportunities across the right sectors, customer service, customers, contracts, and geographies. Our resources, that is, our supervision, our virtual design and construction or VDC capability, prefabrication, and as important as anything, our subsidiary and segment leadership's time, attention, and focus, as they are ultimately the quarterbacks that direct this allocation. We think about that across all those sectors, customers, contracts, and geographies. Last night, we signed an agreement to acquire the John W. Danforth Company based in Buffalo, New York, with operations across upstate New York and Ohio. Danforth is a mechanical construction company with expertise in data centers, health care, industrial manufacturing, and commercial. They also have excellent VDC and prefabrication capabilities. Danforth should add about $350 million-$400 million in revenues with solid steady state margins.

However, in the first year those margins will be reduced due to backlog amortization. The transaction is expected to close in the fourth quarter, subject to customary closing conditions. They are a great team, they have a great cultural fit with us, and we have worked together successfully in the past. We do look forward to much success together and we look forward to soon welcoming the Danforth team to our EMCOR team. I'm going to close with what's probably the most important statement that I make at every call. I want to thank my EMCOR teammates. Thank you for your dedication to EMCOR and our customers. Thank you for living our values every day. Thank you for taking care of one another and keeping each other safe. Thank you for the outstanding results you continue to produce for our shareholders. With that I will take questions.

Thank you. We will now begin the question and answer session. As a reminder, to ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If you would like to withdraw your question, please press the pound key at this time. We will pause momentarily to assemble our roster, and today's first question comes from Brent Thielman with D.A. Davidson. Please proceed.

Maybe just to build upon some of your comments and the concluding statement there.

Obviously, I think maybe somewhat folks somewhat surprised by the margin profile this quarter. I think to your point, this is a construction business. You have impacts from mix and other factors in any quarter. Maybe Tony, could you build on the margins that you're seeing on new work, are they attractive relative to what we see reported here? Just an opportunity to address those concerns here.

This is some of the strongest overall operating margins we've had in a quarter. We knew we were going to have amortization headwind in the electrical segment. Without the amortization headwind or the investment in new markets, reality is we're 14%+ in electrical. Mechanical margins are very strong. Building services margins are strong. Jason, I think year to date, these are the best margins we've ever had on a year to date basis.

I think the thing that I go back to, Tony, is we've said over time, right, a rolling 12 to 24 month average is where we expect our margins to be. Those margins would be somewhere between 9.1% and 9.4%. On a consolidated basis, we delivered 9.4% in the quarter. When you look at where we were as we exited Q2, we said for full year our margins would be between 9% and 9.4%. We delivered at 9.4% in the quarter. I think we're delivering the margins that we anticipated.

Yes, what the business does, I mean, yes, it bounces around a little bit, but you don't buy something the size of Miller with the amount of backlog amortization we're going to go through, RPO amortization we're going to go through, and be able to keep margins at the levels they were. I mean, it's just that's not. We did that when we gave our guidance for the year. I'm a little befuddled about some of the margin reaction, to be straight with you.

Separate question. Nearly a double, if not more in data center RPOs.

I think folks understand that's a pretty good market. Maybe if you could just touch on maybe some of the other sectors and what areas are surprising you in terms of relative strength or maybe even getting stronger that you point out outside of data centers.

Yeah, I think you hit on a really important question, Brent. I mean, you know, we have a broad base of business outside of data centers that's pretty successful and I think a really good marker, and I always think about this in our business broadly, is what goes on in the mechanical service business, which grew mid single digits, has strong operating margins, and almost has no data center exposure. I think I have this right. Seven of our ten mechanical segments had growth and ten of our eleven electrical market sectors had growth. We're seeing strong growth on the mechanical side in water and wastewater. We continue to see strong demand in healthcare in both sectors, really. The addition of Miller really bolsters our healthcare exposure on the electrical side in some of the fastest growing healthcare markets in the country, which they're exposed to.

We continue to see good opportunities in traditional manufacturing, especially for us in food processing. It's one of the few things we do on a large scale EPC and we do it very well out of our Shambaugh subsidiary in Fort Wayne, Indiana. We continue to see pretty good demand in traditional retrofit commercial. It's a strong market for us, especially with an eye towards energy efficiency and the restocking of buildings that continues to go on. I think high tech manufacturing, that's a choice. We have very strong demand in parts of the country and we're executing very well. In other parts of the country, it's a little lumpier or we may rededicate those resources, quite frankly, to more data center work versus slog through another semiconductor plant in parts of the country. We did very well on it.

It's just a very difficult customer set and application in one particular case. When you put it all together, demand is broad based, it's strong. We like having diverse demand. We're going to continue to pursue diverse demand and I think that's good news for our shareholders for the long term. We're not giving up anything on the data center side by doing that, as you said, with the size and good. Next question.

Comes from Adam Thalheimer with Thompson Davis. Please proceed.

Thanks for taking the questions. The organic expansions you talked about that impacted the electrical segment, Tony, can you just talk about the investments you're making.

How long that headwin might persist, and what the benefit?

I think typically, Adam, it's a one or two quarter headwind as we start up the job. It's a margin investment is what it is. It's not really a capital investment upfront. It's a margin investment as we have to go through the learning curve of building a labor force. Sometimes that takes a little longer. Sometimes we get it right at the beginning of a new market and sometimes it takes us further into the job to get it right. We do that all the time and we only call that out, I think, to make investors aware that it's not a linear line. When you expand from what was six to eight, three or four data center markets in 2019 serving to over 16 today electrically and from one or two mechanically to over six today mechanically, that's not a linear straight line.

We have yet to not do it successfully. It's just more of a pointing out that, hey, that's part of how we grow the business and it's part of what we almost look at as R&D to go into a new market.

I think there's a combination of things that we expect to happen as we move forward. We'll build that labor force, we'll get that efficiency, we'll inherently become more productive as we do the next phases of these contracts, and we'll learn some lessons here. We'll price our jobs to that market. It's a number of things that we think kind of improve as you go from the first set of jobs to those next couple.

It's an ongoing headwind, always in the numbers. This was a little more because it was a little bigger site.

Ok, I think, I mean you left the prospect of flat Q4 margins in the guidance, which I thought was interesting. Just curious how you might get to the high end of the Q4 margin guide.

I think it's just project timing. At this point, there's really nothing new. We'll have, depending on when Danforth closed, it's not going to really add anything, but we'll have revenue coming in without a lot of margin because of the headwind of the backlog amortization. We're still running off the Miller backlog amortization. I think those are the kinds of things operating wise, we expect to operate pretty well in the field.

The next question comes from Brian Brophy with Stifel. Please proceed. Yeah, thanks.

Just wanted to follow up on the geographic investments.

Just wanted to see if you could help us quantify the impact.

I think some of the numbers you gave, my back of the math suggests 200, maybe 250 basis point impact of margin in the quarter. Am I in the ballpark there?

Yeah, I think I'll give you dollars and we can work that into margins. I mean, if we look at the jobs that drove it, it's probably about $13 million or so.

I appreciate all the commentary on the U.K. business.

Curious how you guys are feeling about the business portfolio after this transaction closes.

Is there anything else you guys would consider non-core or how are you thinking about the portfolio at this point?

We look at our portfolio all the time and portfolio actions to the size of the U.K. portfolio. Look, we're making portfolio adjustments all the time in our mechanical and electrical construction business and even mechanical services. One of those portfolio adjustments we just talked about, we invested in a series of projects in a geographic market or two to gain scale in that market as a $13 million investment. You all don't think about that as a portfolio action. It was a little larger in this quarter, but it's major metro areas in this country. We have no interest participating on the electrical side in the traffic market anymore. We've been slowly winding that down across a number of markets.

Those kind of things I would call routine course of business, the ins and outs, opening a couple new branch offices in the mechanical service business, either through a small asset purchase, some guys' tools and trucks, which there's one move in one way that we announced and there's one moving the other way. The U.K. is out. John W. Danforth is in. The U.K., really, it's a success story for people that have followed us over a long period of time know that.

We turned something into something very successful with a great team, and it was the right time to exit for our shareholders. For that team and for that business, it wasn't going to be a place that we, because of all the other opportunities we have, it wasn't going to be a place that we were going to allocate a lot of capital to grow. For example, we weren't going to take the U.K. platform and grow through the rest of Europe to build a facility services business. That's not something we were going to do. It's probably something that needed to happen to continue the growth in that business. John W. Danforth is another decision.

Someone we knew, someone we've known very well in a market that's steady, in a market where they have a leadership position with a group of people that we have worked with before. They got some interesting capabilities in BIM, VDC, prefabrication and those capabilities. They work in the data center space, they work in the heavy industrial space, they work in the healthcare space and execute those projects very well. Not a one for one as far as exchange, but it's the kind of thing, midsize mechanical construction acquisition in, and we have balance sheet capability to do both without selling the U.K. It was the right time. You look at other parts of our portfolio, we examine it all the time and we are probably headed towards how do we think about the rest of our site-based business, which is pretty integrated into our building services business?

It's on the improvement trend. We have the industrial services business, which has had a tough couple of years. That being said, some of the things we do there, some of the prospects we have, we think we can improve it. I'll always say these things this way. Deals happen both ways when they happen and there's a timing that's right. Right now we think we have a good portfolio that we're executing on. This still has upside across all the businesses that we're operating in.

Appreciate all the color. I'll pass it on.

The next question is from Justin Hauke with Baird. Please proceed.

Yeah, I guess maybe I was going to build on that last question just about the capital allocation and obviously you did the Danforth after the quarter on a good cash flow quarter, and you've got the proceeds coming in from the U.K., but should there be any read or do you want to make any comments about just the lack of buybacks in the quarter? Is that signaling that there's other kind of pending transactions that are out there that maybe are closer to coming than not or anything about just usually your buybacks are pretty predictable quarter to quarter?

Yes and no. We did a greater amount than we typically would do in the first part of the year, and most of that executed off of a 10b5-1. We're not really traders in our stock. There was a bit of a dislocation, and the 10b5-1 picked it up in the second quarter. That being said, we're not capital constrained. We'll be balanced capital allocators over a long period of time. If you go to the end of my remarks, we look at all uses of capital from organic investment, and it's interesting, we were thinking about what we've added this year or we'll add by the end of the year. We'll add about 400,000 sq ft, give or take, of prefabrication space and our ability to prefabricate. Some call it modular construction. Maybe it's the next step down, which for the most part we do for our jobs.

We do that across our fire life safety business, our electrical business, and our mechanical business. Danforth adds to that capability. They have a very well run, very modern shop, and it's one of the attractions they had with us in a pretty good labor market. We don't have capital constraints. There's not a lot of timing going on unless there's a big dislocation. I wouldn't consider today a big dislocation. We ran up in a week and we came right back to where we were.

We think we're performing well. Our cash flow is good. We're going to keep a strong and liquid balance sheet. I think what you see on the last page of our presentation, you take a six year trend, I think this next six years will look very similar to the last six years.

The next question comes from Avi Jaroslawicz with UBS. Please proceed.

Thanks for taking the question. I notice that organic growth has been running around mid to upper single digits the last few quarters. Are you thinking that should be picking up at all in the near term just based on some of the backlog growth that you're seeing, or does this seem like a more comfortable rate for the foreseeable future?

Look, I think high single digits, low double digits is probably a comfortable rate. I mean, the reality, right, we're a big company and the law of large numbers starts to take over. You think about what we have to add from an organic to say we're growing 10% organically. You take our guidance, that means we added between $1.5 billion and $2 billion of revenue organically in a year. That's pretty darn good. We still maintain the cash flow characteristics we have and the margin profile we have. Jason, I think that's probably not a bad way to look at it.

I agree with that, Tony, especially when you look, I would look at the RPO growth sequentially. We're growing 5%-6% sequentially. I think that gives you a little bit more of a tell for the future. The other thing too is if you look at our RPO and you look at how much of it will burn in excess of 12 months, right now I think it's about 20% or so will burn greater than a year. If you look historically, that number was typically about 15%. Some of the work we're booking now is a little bit longer term, which I think impacts just the turn of that RPO.

Yeah, if you think about it, we had some really good growth markets. I think if you look at our data center business, that's going to grow high teens to mid-20s for a while. If you look at any forecast out there, cloud storage data centers are going to grow high single digits to low teens and AI grow depending on who you look at, and we've looked at many and we've, remember we're actually connected all the way back through our customers and their capital spending plan. AI data centers are going to grow 20%+ and that's going to become an increasing part of our business. That'll be by design, but we're not going to neglect our traditional business. If you look long term, right, we've grown in excess of non res in our construction businesses. 500 basis points over a five year period.

Over a five year period, that's probably a pretty good marker and it may go a little more than that because of the data center concentration, but maybe that picks up another 100 basis points. I mean these are long term projections but I think, you know, high single digits organic, maybe pick a couple more points up through acquisition is how we think about the business over a long term and how we have thought about it over a long period of time in our planning.

Could I just ask a follow up in terms of some of the cost of growth that you've been seeing, just with growth having been relatively steady on the organic side? Can you share some more color as to what made this maybe more unique than past situations? Been growing at a pretty nice clip over the last couple of years. Similarly, have we had any periods where there've been a similar type of level of these startup inefficiencies in the mechanical construction segment?

They show up. Yes. The only reason we called it out this quarter is a little more than usual. This happens just about every quarter, and you can see it in our one disclosure in the Q. That's where most of that rests. This was a little more, a little tougher market, a little tougher job building the labor force, and really it's still a profitable job. I mean, I want everybody to think that we invested into a lost job. That's not what happened here. This is classic revenue recognition thing. Right?

The margin came down versus what we expected. Like Jason said, we probably were a little more optimistic than we needed to be as we entered that new market. Quite frankly, if you looked at the customer and what we thought we were going to be doing and the speed at which it was going to happen, we'd worked from other markets before and we had different experience and we had a more experienced workforce.

Our next question is from Sam Kusswurm with William Blair. Please proceed.

EMCOR Group (EME) Q3 2025 Earnings Call Transcript

Company Participants