Good morning. My name is Jerome, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group Third Quarter 2021 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Mr. Brad Newman with FTI Consulting he may begin.

Thank you, Jerome and good morning everyone. Welcome to the EMCOR Group Conference Call. We are here today to discuss the Company's 2021 third quarter results, which were reported this morning. I would like to turn the call over to Kevin Matz, Executive Vice President of shared services, who will introduce management. Kevin, please go ahead.

Thank you, Brad. Good morning, everyone. And Happy Halloween. As always, thank you for your interest in EMCOR. And welcome to our earnings conference call for the third quarter of 2021. For those of you who are accessing the call via the internet on our website, welcome to you as well. As you have arrived at the beginning of our slide presentation that will accompany our remarks today. We are on slide two. The presentation and discussion contains forward-looking statements and may contain certain non-GAAP financial information. Page two describes in detail the forward-looking statements and the non-GAAP financial information disclosures. I encourage everyone to review both the disclosures, both disclosures in conjunction with our discussion and accompany slides. Slide three shows the executives who are with me today. They are Tony Guzzi, Chairman President & Chief Executive Officer, Mark Pompa, our Executive Vice President & Chief Financial Officer, and our Executive Vice President and General Counsel Maxine Mauricio. For call participants not accessing the call via the internet, this presentation, including the slides will be archived in the investor relations section of our website, under presentations. You can find us at emcorgroup.com. With that said, please let me turn the call over to Tony. Tony?

Good Morning. Thanks, Kevin. And thanks for joining our call. My opening comments will reference pages four through six of our presentation. As we have navigated the last two years, we have learned to operate in highly uncertain and volatile environment. And we have done it with success on almost any metric. We've had to accomplish our mission while keeping our people safe. Our company values of Mission First People always have served us extremely well throughout these unprecedented times. We had an exceptional third quarter at EMCOR, especially against a very difficult comparison in the prior year. As you may recall, in the third quarter of last year, we were bringing about a third of our company back to full operations. We had projects poised and ready to resume or start, delay service that needed to be completed. And buildings, campuses and production facilities that we helped our customers reopen as they resumed operations. Further, we had yet to bring back our full complement of staff that we need to sustain and build our operations. Said simply, we had an abundance of work had all the materials and a lower cost base, as we were still returning to full operations after the extreme cost reductions we had taken in response to the pandemic. Against that backdrop in comparison for the third quarter of 2021, we were able to post $1.85 and earnings per diluted share, versus $1.76 of adjusted diluted earnings per share in the year ago period. We grew revenues to $2.52 billion, with 14.5% overall revenue growth and 12.2% organic revenue growth. We posted 5.4% operating income margins despite strong headwinds from supply chain issues and labor disruptions caused by the Delta Variant. I believe this is very good performance considering the operating conditions we faced in…

Thank you, Tony, and good morning to everyone participating on today's call. For those accessing this presentation via the webcast, we are now on slide seven. Over the next several slides I will augment Tony's opening commentary on EMCOR’s third quarter, as well as provide a brief update on our year-to-date results through September 30. All financial information referenced this morning is derived from our consolidated financial statements included in both our earnings release announcement and Form 10-Q filed with the Securities and Exchange Commission earlier today. So let's revisit and expand overview of EMCOR’s third quarter performance. Consolidated revenues of $2.52 billion are up $320 million or 14.5% over Quarter 3, 2020 and represent a new all-time quarterly revenue record for EMCOR. Each of our reportable segments experienced quarter-over-quarter revenue growth. Excluding $50.3 million of revenues attributable to businesses acquired, pertaining to the time that such businesses are not owned by EMCOR and last year's quarter, revenues for the third quarter of 2021 increased nearly $270 million or a strong 12.2% when compared to the third quarter of 2020, which was still somewhat impacted by the effects of the COVID-19 pandemic. The specifics of each reportable segment are as follows: United States Electrical Construction revenues of $527.9 million increased $55.9 million or 11.8% from 2020s third quarter. Excluding acquisition revenues within the segment of $29.5 million this segment's revenues grew organically 5.6% quarter-over-quarter. Increased project activity within the commercial healthcare and institutional market sectors were the primary drivers of the period over period improvement. United States mechanical construction segment revenues of $999.6 million increased $108.1 million or 12.1% from Quarter 3, 2020. The results of this segment represent a new quarterly revenue record. Revenue growth during the quarter was driven by increases within the manufacturing, healthcare and commercial market…

Thanks Mark. And I'm going to be on page 12 remaining performance obligations by segment and market sector. We had another strong project bookings quarter here at EMCOR. Each of our five reporting segments are RPO growth year-over-year, while as we mentioned earlier, simultaneously increasing revenue over the same period. We also saw RPO growth in seven of the eight market sectors in which we report. By definition, RPO and project bookings are forward-looking. So it's fair to say that we're currently seeing strong future demand across all of our segments and market sectors. While September 30, is a single point in time, and project certainly ebb and flow, we are well positioned moving into 2022. As mentioned earlier, total company RPOs at the end of the third quarter were just under $5.4 billion, up $849 million or 18.7% when compared to the year ago level of $4.5 billion. Organic RPO growth was strong 15.6%. Year-to-date for the nine months completed in 2021 total RPOs have increased $784 million, or just over 17%. The strong booking activity across the company trends related to a book-to-bill ratio well over one, despite the company generating record revenues. Our two domestic construction segments experienced strong construction project growth in the quarter, with RPOs increasing $606 million or 16.5% from the same period last year. RPOs were lifted slightly by two Midwestern Electrical Construction Services acquisitions completed this year. Building Services or RPO levels increased 180 million or almost 29% from the year ago quarter, 142 million and 180 million was organic. We continue to see widespread small and short duration project demand and believe this will remain active through the end of the year and into 2022 as workers returned to buildings, campuses, factories and institutional facilities across the country post COVID and…

[Operator Instructions] Your first question comes from Sean Eastman with KeyBanc Capital Market. Your line is open.

Hi, Sean.

Great. Morning. Great quarter. Thank you. So everyone is obviously worried about labor availability supply chain, inflation, you guys touched on it quite a bit in the prepared remarks. But maybe just in short, Tony, what's the playbook for running the business in this sort of resource constrained operating environment? I mean, what are kind of the one, two, three things you're doing or really focused on, as we look out the next couple of quarters.

Sean, it really comes down to a couple things. The labor availability, I'm going to put to the side for a minute. I think our folks over a very long period of time have figured out how to navigate through labor availability. And now we have learned how to navigate through disruptions to labor, with the pandemic, on our job sites. So I think we know how to do that. I think we'll get through that. And we've done it before in high growth markets. We're blessed with some of the best local management that you can have that really understands their labor, and understands how to keep good supervision on job sites. Going to the second point on supply chain. I think now's the time in some ways you get rewarded for being a good partner. EMCOR has never been known as a company that takes advantage of its suppliers on terms or doesn't do what we say we're going to do. We also don't blame suppliers for things that were our problems, which could be common practice in our industry at times. So we're known as a pretty good partner for a supplier. And that's paying dividends. Now, where you see that most is at the distribution level. Most of what we buy comes through distribution in some form or another. And we have very good OEM relationships. And because of our scale, we have the ability to make sure on our most important jobs, that we can keep availability, as good or better than anybody else. The thing that might be a little bit different in this playbook right now is how you deal with the short term quick term service work. One of the things we pride ourselves on is keeping our customers facilities, factories, educational…

No, Tony. I think Sean what, it's unprecedented, at least in my professional career. And not to overplay this. But I think, the fact that we have long standing relationships within our supply chain certainly advantageous to us. But ultimately, there's a lot of things that have to happen on the front end, in order for us to continue to be successful. And we all contingency plan to the best that we can. But ultimately, there's only so much we could do. And I think we've been successful today. And based on our revision and earnings guidance, we don't see any reason why we will not continue to have the same level of success as we move forward through the end of 2021.

Okay, great. All right, that's helpful. And then and then maybe just trying to connect the dots between Tony, your last comment there just on unprecedented supply chain, lead times, and not getting too advanced on a project until you're sure you have the materials, sort of balancing that with this, huge momentum in RPOs. And, and in, in the bookings trends year-to-date. I mean, the RPO's are up mid-teens organically, clearly, that support some nice growth into next year. But do we need to kind of moderate our expectations around kind of how much you're going to let the business grow in this kind of environment. I mean, if you can, sort of level set on a reasonable expectation for growth into next year, even qualitatively around these dynamics, that would be that would be helpful.

Yes, look Sean, we've always had the belief that we typically in a good market grow little grow better than what the non-res markets going to grow. We are in some resilient sectors. And so we're not going to hold back when we can win good work, and we can responsibly execute that work. And so if you look at our RPO’s we believe that that's representative of what we think we can accomplish at those elevated levels. I think what happens in this kind of environment, and we've seen this over the last two or three years, is there's a definite especially at the two ends, right? Owners, when you're doing a service project or retrofit project, want to go with quality people that know how to do the work and can plan and you think about it, there would even be more reason to want to deal with a company like ours, because they know that we have the resources to make that happen. And on the top end, at the project level, you're competing against a budget a lot of times now, but people want to be with well resource companies. And that's beyond just financial strength. That's what the resources to actually do the planning to learn from each other, to be able to draw on the kind of supplier relationships Mark and I talked about, and to have very clear communications on what we can accomplish and on what schedule. So I don't think there's a fixed amount which say this company can grow. It's very much a bunch of individual decisions and local markets and sectors. And I think the appetite for larger projects is out there with some of our owners. I tell you what you do see in this kind of environment, I think what we're benefiting. From some of our construction manager, general contractor customers in a market that may have less complication, sometimes would like to cut up a job, right and give different pieces to different people. In this kind of environment you'd rather be with somebody like us and let us worry about multiple parts of the project and multiple trades on that project. And what I mean by that is not necessarily or mixing or electrical mechanical work, but we can take a greater mechanical scope or greater electrical scope on a project and so we are seeing that. And that might be what part of what's underlying that RPO growth.

Very interesting. Alright, I'll turn it over. Thanks, guys.

Thanks, Sean.

Your next question comes from Adam Thalhimer with Thompson Davis. Your line is open.

Hey, good morning, guys. Congrats on a great quarter.

Thanks, Adam.

Hey, Tony, what would be your thought on margins in backlog?

Adam, I don't have any reason to believe that we didn't we don't we haven't booked work at an acceptable margin. Now, margins fluctuate quarter to quarter as Mark talked about. We're still well above even in the quarter, three year average. If you've been following us a long time. I think you would agree for the most part. These are very good margin levels especially with the headwind that we're seeing in industrial with no real operating income margin contribution. Some of that has to do with contract structure, as you get to the bigger jobs, right, you might be working on more GMP or guaranteed maximum price type contracts that adjust. And there's more cost transparency, some of it will have to do with the quick turn service work in the margin there. So we don't ever sit there and say, hey, there's a specific margin of backlog we're looking for, quite frankly, it's a tough thing to measure. But we do look for say, do we have the right work? The right people, and the right tool is to earn an acceptable return on capital employed, and return on investment and return on labor for that project work. So we feel good about what we have in RPO’s. We think it's good to mix it we've had, but again, that will fluctuate quarter-to-quarter. Mark?

Yes. Adam, really nothing to add to that. I think, when you look at our year-to-date, margin performance, it is quite strong. Clearly, because of the complexity of this business, you do get some margin fluctuations, quarter-to-quarter depending on the timing of work. We are, we are on the front end of a lot of large work right now. And, as our history has indicated, we tend to, we tend to be a little bit more cautious with profit recognition at that point until we're fully established on the job site. And clearly with, the everything that was required as a result of the COVID-19 pandemic we're being extra cautious with regards to our labor on site, and obviously, how we're working with the other trades around us. So, we certainly did not tell our operating teams to reduce their level of expectation for profitability and work as they're approaching their markets. We're clearly requiring the same level of excellent execution amongst all of our projects and service opportunities, so that so that it hasn't changed. So I don't see that our future is going to look any different than our than our recent past. And we're going to continue to perform well, for all of our stakeholders.

Yes, let me let me tie together a couple thoughts there for the broader group. And Adam, you gave us a good opening to do that on page 13, and 14. So we talked about what we had in these resilient sectors in these growth opportunities. And so when you look at page 13 and you see data centers, warehouses, industrial manufacturing, healthcare, water and wastewater, mechanical services, in their quality of fire protection. Everything we've talked about for the last year and a half is still very strong. And some of them really stand out. I mean, fire protection continues to be a very strong market for us. We are the nationwide leader, especially in the installation side. And we got to be two or three on the service side now. This digital buildup, data centers and the digital infrastructure around supply chain that's happening within the country, maybe they should let some of those guys take over the ports and figure out how to get that done. But what we're doing within the country is pretty strong. Well the data center market continues very strong as the infrastructure for the supply chain for the big delivery services. Industrial manufacturing continues to be two, I think three stories for us. The first story is we're really good at tech manufacturing and supporting tech manufacturing. And you think what's going to happen with a chip build out, we're well positioned in a couple markets where that's going to take place. You think what's happening in food processing, which is going to continue to grow. We're very well positioned with our Shambaugh subsidiary. They have some nice opportunity in front of them, they tend to be episodic. But that team knows really knows how to execute, as does our tech manufacturing…

Okay, great color. I'll turn it over.

And your next question comes from Zane Karimi with D.A. Davidson. Your line is open.

Hey, good morning, Tony, Mark, Kevin, and congratulations on the solid quarter.

Good morning, Zane.

So I know you guys alluded to it earlier, but can you provide some more color around any of the impacts of industrial segments or related to the storms in the South?

Mark, I want to turn that to you.

Yes, Zane. I mean, clearly, the storm activity in the current year, third quarter was not as exaggerated as it was a year ago. But clearly Ida and to a lesser extent, Tropical Storm Nicholas were impactful, most impactful to our customers who basically they had a closer facility as a result of that, which ended up deferring some of the work that we were anticipating and doing in the third quarter. So that work, for the most part is has trickled into quarter four. However, some of that looks like it actually might trickle into the first quarter of 2022. So certainly impactful. But last year's quarter was much more impacted by the rest. I believe there was five named storms in the third quarter of 20, calendar 2020. Most of which did impact us our customers in some way, shape or form. So we, we did have lost workdays this quarter, but still, we're all happy with the performance of that segment, certainly on a comparative basis to a year ago and how that market is developing for us as we move forward in the year.

Yes Mark, I think one of the things we see, in general with industrial services Zane is, we've communicated correctly, here at this level, about what how we thought the year was going to roll out and how things would strengthen and where the opportunities would be. We can only do that, because that tells you how intuitive our folks are with their customers, and what kind of position we have with our customers to be able to actually get a pretty good handle on how the markets evolving. I don't think that's necessarily that common with some of our competitors. But it shows you the depth of our customer relationships, but also the sort of market awareness that our team has. The other thing is, when you get to that, the impact of storms, we can't control what happens within our customers. But we've started to do a much better job of in our case, is we've done more and more things to harden our facilities to be able to withstand the storms, much better than over the last 18 months than we had previously. And we're going to continue to do that.

Great, thank you. And then one more. Yes, you did mention, solar. Some of that's interesting. But can you talk a little bit about the M&A environment that you're seeing now? And how you're feeling about that going into 2022?

Yes, so I've been a consistent whiner over probably 10 years, complaining about the prices private equity will pay and the things they will do and deal structure. You know what, somehow we've managed to do a bunch of very successful deals with the right people at the right time. And I think our acquisition program over the last five years, has been as well executed as well integrated as almost any time in our history. I think it has been the best time in our history for M&A. All that being said, we've made some progress, right. We've done $114 million here today. I think the way we've described it, we expect to be able to at least replicate what we've done from 2017 through 2024. Deals happen when they happen. We have a lot of discussions going on. It's a pretty active market for every one deal that may even get to the point where I look at, we've looked at 10. Our business development team, and they're really good at working with our segment people to get that down to something we can look at. We've done some creative things around the companies we've just bought, we bought our first ESOP and we did extraordinarily well. And we're very happy with the incorporation of that very fine electrical contractor in the Midwest into our family. That was something we hadn't done before. And but we figured out how to do that. And when that opportunity presents itself, we will be a buyer that tends, we think that could be a good market for us. We aren't competitive when it's a broad auction with 15 private equity people thrown in numbers bidding the book. So, I'd say more of the same. We continue to see opportunities, and we…

Great. Well thank you for all that. And I'll jump back into the queue.

Thank you

All right. Thank you no further question at this time, so I'll turn the call back to Tony Guzzi for any closing remarks.

Yes, thanks to you all. It's certainly been an interesting year. And I want to then just finish by thanking our EMCOR employees, our subsidiary teams, you've done a great job, our segment teams. I know the four of us sitting around this table today feel blessed to be able to be on the same team as you all. Stay safe. And I'm not going to wish you a happy Halloween because it's probably the holiday I care at least about, but we won't see until after the holiday. So Happy Thanksgiving, and happy holiday season. Thanks. Bye.

Thank you. And that concludes today's conference. Thank you all for joining. You may now disconnect.