Good day and welcome to EMCOR Group Q1 ‘25 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Andy Backman, Vice President, Investor Relations. Please go ahead.

Thank you, Sagar and good morning everyone and welcome to EMCOR’s first 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, 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 first quarter and discuss our RPOs. Jason will then review our first quarter and numbers before turning it back to Tony to discuss our guidance, and then we’ll open it up for Q&A. Before we begin, as a reminder, this presentation and discussion contains certain forward-looking statements and may contain certain non-GAAP financial information. Slide 2 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. And 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 our Form 10-Q filed with the Securities and Exchange and Commission. And with that, let me turn it over to Tony. Tony?

Thanks, and good morning, and thank you. I’m going to be mostly on Page 4 here to start. We had a strong quarter at EMCOR in the first quarter, generating revenues of $3.87 billion, reflecting year-over-year growth of 12.7%. We earned $318.8 million in operating income with an operating margin of 8.2% and diluted earnings per share of $5.26, representing an increase of 26% from the first quarter of 2024. When you adjust for the $9.4 million of transaction expenses related to our acquisition of Miller Electric, which closed in February, we earn non-GAAP adjusted operating income of $328.1 million or 8.5% of revenues and non-GAAP adjusted diluted earnings per share of $5.41. We are very pleased with our overall performance. Our Electrical and Mechanical Construction segments, which had year-over-year revenue increases of 42.3% and 10.2%, respectively, drove our performance. The growth in our revenues reflects both our proactive move into new geographies to better serve our customers as well as the confidence that our customers have in our ability to perform complex projects. Driving this growth was increased activity within the network and communications, which is data centers, healthcare water and wastewater market sectors. The results of our Electrical Construction segment also included $183 million in revenues from Miller Electric. The integration of Miller is on track, and that is a credit to both the EMCOR and Miller teams. When you share the same core values and have similar operating disciplines and share best practices, then the cultural alignment makes integration more successful. Thank you, Henry and your team. With respect to operating income, the reasons behind our growth remain the same. We continue to have excellent execution in our Electrical and Mechanical Construction segments with 12.5% and 11.9% operating margins, respectively. To achieve these margins, our teams continue…

Thank you, Tony, and good morning, everyone. Starting on Slide 6, I’m going to review the operating performance for each of our segments as well as some of the key financial data for the first quarter of 2025 as compared to the first quarter of 2024. As Tony mentioned, consolidated quarterly revenues were a record $3.87 billion, an increase of $435.1 million or 12.7%, which was once again led by our Construction segments, where we continue to execute well and demand remains strong across most of the key market sectors that we serve. Revenues for the first quarter included $251 million of incremental acquisition contribution, including $183 million from Miller Electric since the acquisition on February 3. On an organic basis, revenues grew by 5.4%. If we look to each of our segments, revenues of U.S. Electrical Construction were a record $1.09 billion. Due to a combination of organic growth and the Miller Electric acquisition, this segment generated increased revenues from almost all market sectors with the most significant growth coming from Network and Communications driven by our data center projects. In addition to data centers, notable revenue increases were experienced in healthcare, where our quarterly revenues doubled, transportation due to certain infrastructure projects and institutional as a result of a greater number of public sector projects. U.S. mechanical construction revenues were $1.57 billion, increasing 10.2%. Similar to Electrical, the largest growth during the quarter was seen from data centers within network and Communications. In addition, this segment had noteworthy revenue increases within Healthcare due to both greater organic activity as well as incremental contribution from acquired companies, hospitality and entertainment, given increased project activity and water and wastewater driven by continued strong demand for our service offerings across the Southeast region of the United States. Revenues in the Mechanical…

Thanks, Jason. I’m going to be on Pages 10 to 11 to finish. Given the strong start to the year, we are going to raise the low end of our diluted earnings per share guidance by $0.40 to a range of $22.65 to $24. Our revenue guidance will remain the same at $16.1 billion to $16.9 billion. I’d always remind you, this is not a quarter-to-quarter business. The guidance reflects our expectation that we will continue to deliver strong operating margins in 2025. In setting this range, we believe that we have covered the potential impact of tariffs on our business. We will manage through the tariff uncertainty similar to how we manage the supply chain and cost disruptions around COVID. We will try to pass on price increases and protect ourselves as much as we can through proactively negotiating favorable contractual terms. While customers possibly may defer spending or delay projects, we have not yet seen any such actions in a meaningful way, and the growth in our RPOs reflects the strong demand we continue to experience for our services. We also believe that the normalization of trade and trade barriers will be a long-term net positive for EMCOR, resulting in more reshoring of critical manufacturing. We continue to believe that we are still in the early stages of this investment cycle. Said simply, we will manage this short-term challenge like we have many others. It is part of our EMCOR culture to train continuously and share best practices around operating in a volatile, uncertain, complex and ambiguous environment, we call that VUCA. We train on it. And quite frankly, that’s been the world we’ve lived in for the last 12 to 15 years. Honestly, that is the type of environment that we have come to expect. And as…

Thank you. [Operator Instructions] Our first question comes from Brent Thielman from D.A. Davidson. Please go ahead.

Great. Thanks. Good morning.

Good morning, Brent.

Tony, really strong start on RPOs, it looks like good momentum in most areas of the business right now. I guess in light of that, you did keep the top end of the guidance range here. And my question was more, is it to handicap what could be operational risks just related to tariffs or supply chain noise or is it more related to kind of potential growth headwinds that could surface even though it doesn’t really sound like that’s happened yet. Just wanted to get clarity there?

No, it’s related to anything even beyond tariffs, right? There is a lot of uncertainty. It’s not growth related. We think we have the tariffs nailed down in our range. We feel really good about that. We thought it’s April even without an environment that had tariffs and everything else. I doubt we would have raised the top end of our range, even if you said there is no tariffs, no anything. We brought the bottom up because we feel good about that. But the top end, if you do that math all the way out, it was fairly aggressive guidance. And we contemplated a year where we would continue to grow, obviously, with our revenue guidance of $16.1 billion to $16.9 billion. That’s mainly due based on the pace and timing of projects, how they’ll roll out through the year. But yes, more just sort of macroeconomic early in the year, we feel really good about the prospects we have in the business right now.

And I think the one thing to add to that on the margin side, right, is we are maintaining our margin guidance in that same range that we had back in February of 8.5% to 9.2% with an adjusted margin for the first quarter here of 8.5%, we’re essentially saying margins will at least hold, if not improve throughout the remainder of the year.

Okay. Okay. And then – and I guess, again, back on the high-tech manufacturing, you’ve got a lot of momentum in most areas of the business. Obviously, RPOs are off a bit there. But it seems like there has been a slug of announcements lately on the pharma side related to reshoring. So I want to come back to that, your assessment of the opportunities that may be building in that vertical where we could sort of see an inflection maybe in RPOs over the next couple of years here?

My gut tells me, yes. Pharma, I also see you’ll see more semiconductor work come in. We’ll be careful what we do there. But I think macroeconomically, it’s set up for that, right? I don’t think anybody that’s listening to this call right now would say, gee, we feel better about what’s happening in China and Taiwan today than before Taiwan Semiconductor started building fabs in Arizona. Well, the answer to that would be that’s even got more tenuous. So the spending may accelerate over the next 3 to 5 years instead of decelerate. I think that, that one, I think pharma is absolutely that tied to reshoring. But Brent, I would tell you there has been a bevy of new drugs, especially around the weight loss area that we’re also seeing the expansion. And we’re positioned very well. A big chunk of that’s happened in the Research Triangle Park area. We have great capability there across the trade spectrum from mill rights through pipe fitters and onward. I think the other part that is happening is in New Jersey. We have great electrical capability there and mechanical. And then it’s happening in the Indiana area where we’re well positioned, too. And then you get to the biopharm area. It still is Southern California is very strong, and we have great capability there, especially electrically and mechanically. So – and then if you take all of that and you overlay fire protection, we can service the fire life safety nationally. So again, we look at that, if we’re sitting here 5 years from now, we’re going to have built a lot of high-tech manufacturing plants. We’re going to have done it hopefully very well. And our combination of VDC, coupled with prefab, coupled with how well our folks share means and method, we expect to be able to deliver exceptional results for our customers in that area.

And I think, too, in that space, right, as we await other phases of awards of the semiconductor space, we’re still getting work in the other high-tech areas, be it pharma, biotech, life sciences, EV value chain. I mean just in the quarter alone, we had $200 million in inorganic net bookings in that high-tech manufacturing space.

Got it. One more, maybe more housekeeping, Jason, I was trying to get a sense of whether Miller is accretive or dilutive to the Electrical segment margin as you fold that in or maybe it’s neutral?

Yes. I think for the quarter, certainly dilutive to the margin, right? And we talked about the largest piece of that being driven by the intangible asset amortization. And so on an annual basis, we had said to consolidated EMCOR, expect 25 to 30 basis points of margin dilution. For the Electrical segment, I would say it’s probably about 100 to 110 basis points to that segment.

But when we remove the amortization expense, they earn strong margins neutral with our Electrical segment.

Got it. Okay. Thanks. I will pass it on.

Thanks, Brent.

Let’s take our next question please.

Thank you. Our next question comes from Adam Thalhimer from Thompson Davis & Company. Please go ahead.

Hey, good morning guys. Nice quarter.

Good morning Adam. Thank you.

Tony, I want to start on building services. Can you just give us kind of updated high-level thoughts on where you want to take that segment from here?

Well, I think it’s where we have been investing. Our investment dollars have gone into the mechanical service business over a long period of time. Historically, it’s been sort of a 70-30 between site-based and – 30 being site-based, 70 being mechanical service. That’s going to, by this time next year, probably look like 80-20. So, we will continue to invest in technician-based services. We will be opportunistic on the site-based team. We have a really good team there. So, grow where it makes sense. And what we are not going to do is take contracts that have very difficult terms and provide little to no margin. And that’s what you are really seeing right now on the site-based side. So, building services has always been led by mechanical services. Our goal long-term is to grow both, but mechanical services will be the emphasis.

Okay. And then – got it. You bought back a lot of stock in the first quarter despite closing Miller and also you had some cash outflows related to new project starts. What gave you the confidence to do that, or can you just give some additional color behind that?

Yes. I think it starts – Adam, it begins and ends with execution. We have a long-term history of being best-in-class as far as cash flow generation. We see no reason to believe that won’t continue. We will earn cash flow at least at net income, and we will probably exceed that a little bit as the year progresses. There is nothing in our profile that says that won’t happen in the future. Yes, you have customer prepayments that are in and out and bumps here and there, but we are smart about how we set up contractual terms. We are smart about how we execute on a job and keep our customers apprised of where we are in the progress of that job. We are best-in-class at progress billings. And quite frankly, because of the way we have our incentive plan structured, we have a cash focus in this company that’s unrelenting. And put all that together, that gives us the confidence to continue to maybe use our balance sheet a little more aggressively. We have always said that when the right opportunity came along that we would execute that, and it was irrespective of size that we were very comfortable up to $1 billion and maybe even a little bit over that. And we have proven that with Miller. And we have also been – if you look at the collection of deals we have done in the last 5 years, we are really good at executing the integration of acquisitions. And I would put Miller in the top decile of any acquisition integration that we have ever done. So, we are here to build the business for the long-term. We feel good about our cash flow. We feel good about our balance sheet. Jason, do you have anything to add?

I would just say, we did still have very strong operating cash flow this quarter, right. A little bit down from last year, but I think it’s important to remember that traditionally, really with the exception of this year and last year, Q1 operating cash flow for us is historically negative. So, at $108 million even compared to the $132 million or $133 million last year, still very strong operating cash flow in the quarter.

And I think, Adam, cutting through, right, we obviously very – feel very good about not only the profitability, but the cash flow characteristics of what we have in RPO right now.

Got it. Good color. I will turn it over. Thanks guys.

Thanks Adam. Next question please.

Thank you. Your next question comes from Brian Brophy from Stifel. Please go ahead.

Thanks. Good morning everybody.

Hi Brian.

I wanted to ask one on data centers. Obviously, continues to be a bright spot here in the near-term, but we continue to see headlines point to some more noise, a couple of large hyperscalers at this point, adjusting some of their data center commitments. Just curious your thoughts on this area, what’s the latest you are seeing, and have you seen any change in your long-term customer build plans?

Yes. The change we have seen is actually more areas, more search for power, more build. That’s what we have seen. Look, I never read too much into people’s data center announcements because some of that is sometimes just sending a signal they are pausing. And some of that has to do with design changes. We have been through this a couple of times with different hyperscalers, whether it would be on the Colo side or for lack of a better word, the OEM, the owner side with the people that are actually going to occupy. We have experienced this multiple times even on a location where they are going to build six buildings, they build two, then they change the design. What we know is size is increasing, megawatts increasing, our content is increasing and the demand for our resource is increasing. And the number of places people want us to work are increasing. And that gives us pretty visibility, I would say, certainly through the end of the year with RPOs. And with the amount of people that have brought us into their build plans and wanting us to be part of the solution, that has definitely ticked up here in the last six months to nine months.

Got it. Yes, that’s very helpful. And then just wanted to understand some of the moving pieces on the EPS guide a little bit better, obviously some healthy buyback activity in the quarter. I am assuming that’s contributing. It also appears that the Miller transaction costs are now excluded. I guess do I have those items right, and are there any other moving pieces on EPS guidance we should be aware of?

So, when we set the guidance, we contemplated all the impacts of Miller to include the transaction expenses. But this is such a wide range, and it’s so early in the year. It’s hard for us to say or read too much into any of that. Our revenue guidance, we feel good about. We are pegging the low end of our guidance around 8.5% margins, and we are pegging the high end of our guidance around 9.2% margins. And if we operate within there and the volume gets to the high end, I think we are going to get towards the higher end of our guidance. Could margins be stronger, that depends on mix. It not only depends on mix, electrical, mechanical versus the rest of the business, it also depends on mix of kind of contract type, GMP versus fixed price, our ability to convert GMP contracts into fixed price, all of that goes into it. There is 10,000, 12,000 moving pieces out there. It’s April, there is some macroeconomic uncertainty. Quite frankly, with the size of the business now and where we are, we probably, in any circumstance, wouldn’t have raised anything but the low end of this guidance range with the first quarter beat that we had. And at the end of the second quarter, we will give you a pretty good view on maybe what the rest of the year looks like. And maybe at that time, we will have some more to say about the top end of the range.

Got it. That’s helpful. I will pass it on. Thank you.

Thank you.

Next question comes from Alex Dwyer from KeyBanc Capital Markets. Please go ahead.

Hey. Good morning. How are you guys?

Good. How are you, Alex?

Good. So, on the network and communications portion of your business, can you remind us how much of that is purely data center and what makes up the balance of that? And I guess like has there been a shift in your data center bid pipeline and ask of your customers between mechanical and electrical as we think about current versus prior years?

Yes. So, look, 85% or so of that network – the reason we call it network and communications is we also have a low voltage business that’s become national in scope. It’s part of it. It’s 4x the size it was 5 years ago. And so that’s in there, too. But 85% plus of it is just pure data center work, standard electrical work and mechanical work and fire life safety work on data centers. As far as I am trying to remember the next question, have we seen a change in the bid prospects, I would say, yes, the inflection is up because number of sites is up. Look, this is – you have heard me say this before. This is almost like a Game of Thrones looking for power. Everybody is looking for power, to power these data centers, and they are looking all over the country. And we went from – I think I have said we went from serving three data center sites in 2019. And I think we went to 14, now with Miller, we are like 16 or 17 geographies electrically. Mechanically, we went from two, we are like at four, and quite frankly, people would like us to be at 8 or 10 mechanically right now. And fire life safety, we service every data center market in the country. And so net-net, people are in the search for power, and their search for very dependable base load power that can service these data centers. They are becoming bigger, right. The campuses are becoming bigger. And we are working on a couple of campuses right now that will be upwards of 2,500 megawatts when built out. And that’s how people think about data center size now. Typically, the electrical scope is 1.5x to 2x…

Got it. Very helpful thoughts, Tony. I guess second, on the RPO, the 28% growth rate, I think that’s the strongest like RPO growth rate since a couple of years ago. And I am just wondering how we think about this 28% RPO growth against the revenue growth guidance, which is low-double digits. Is that just a function of more of that RPOs for 2026 projects or maybe you are working on more larger projects that burn over multiple years? Just I guess just wondering if there is anything different in the burn cadence of this RPO going forward?

Yes. I think quickly, two things, and then I will let Tony add in as well. First, that 28% does include Miller. So, organically, it is up 17%. And then the second is just if you look at historically, what percentage of our RPOs turn to revenues in excess of 12 months. Historically, that number has always been around 85% or so. Where we stand today about – sorry, it’s been 85% is going to burn in the next 12 months, 15% in excess of 12 months. If we look today, it’s about 80% that’s going to burn in the 12 months and 20% going on beyond 12 months. So, we do have a little bit more of that RPO that’s slated for longer term burn. And that’s just some of the water and wastewater work we are doing in mechanical, some of the food process work we are doing in mechanical and just some of the jobs that we acquired through Miller.

Yes. And the thing I would add, it’s important to also know our revenue growth rate is tempered by what you see in building services and industrial services, right. So, some of that growth rate matches up with what’s going on in the Electrical Mechanical segment, which is where those RPOs are directed towards. And the mechanical services business, which if you looked at the first quarter, right, we grew in our construction businesses total 21.3%, give or take, half of that was organic. The balance was really Miller. There is a couple of other small things going on there. Building services actually contracted. That was all driven by site-based. Our mechanical services business was up high-single digits, right. And then the industrial services business was flattish in the quarter. And that was really geared towards the start of the slower start to the year. And the UK was also flattish. So, you got a part of the business that’s not growing at the rate the construction businesses are. The RPOs are pointed towards the construction and mechanical service business. Those growth rates more line up with what you would expect to see there.

Thank you. I will turn it over there.

Alright. Next question.

Thank you. Our last question comes from Adam at Goldman Sachs. Please go ahead.

Hi. Good morning. Tony, you alluded to the data center business expanding into many more markets, both electrically and mechanically over the last several years. When you think about the growth for that business off the current run rate, is the next leg of growth coming from existing markets or new markets? And just if it’s new, is that an organic expansion or via M&A?

Almost all of our growth in data centers up to this point, I mean through the first quarter of this year has been organic. If you – or acquisitions done 4 years or 5 years ago, and they weren’t really in the data center market in a significant way. If you look at Miller, they contributed, I think, Jason, $400 million in network and communications. I don’t know…

On the RPO side.

On the RPO side. So, I mean they are part of the growth going forward. In fact, I think both the Miller team and the EMCOR team are excited about the markets we can expand with because some of the capabilities they had, some of the enhanced capabilities we bring and the two of us together can even do more with the resources. But I would say also, you asked about the split between new locations and existing locations. I would say it’s fairly balanced if you look over a year. That fluctuates quarter-to-quarter. But if you look over a year and you say over the past year, where has the growth come, I would say it’s 50-50, give or take. I mean current campuses, current – when we say location, we mean like a city or a metropolitan area that’s like a 50-mile, 40-mile, 30-mile, 40-mile radius. That doesn’t mean the sites are all the same. We are talking geographic locations, radiuses, places where they are going to have like prior Oklahoma, they built there before, but now it’s building again.

Understood. And then on margins, you folks cited a mix tailwind this quarter and in prior quarters. Which types of projects are driving the mix tailwind? And how do margins on the average data center project specifically compare to portfolio averages?

I think in general, when we say mix tailwinds, we mean mix tailwinds more towards our construction businesses right now. I think any projects have a range of outcomes on margins. Clearly, the larger, more sophisticated ones, if we get it right, where our customers are very demanding, and we have been part of the design/assist, if all that works out, we can do a little bit better. That’s mainly based on our execution more than anything. I think midsized projects can also have those characteristics and small projects have very steady margins by and large and mix up. The reality of all that project mix right now in general to include the mechanical services business, which is more small project focused sort of $5 million and less. I think the reality of all of it. We are operating at – over the last 3 years at the high end of what we have done over a 10-year period. And I think the reason for all of that is, we have gotten better. Maybe pricing has got a little bit better, but these are really demanding customers we work for. So, they are not paying $0.05 more than they have to. We have gotten better, and we have gotten better on the small project side because we can deliver faster for the owner and also disrupt the typically retrofit projects. We are very good about not disrupting their ongoing operations. And so that’s a valuable scale, and we have very good small project crews. On the midsized projects, it’s sort of better execution. And we are able to take some of the learnings we have from the large project side on VDC in prefab and bring that down into the mid-market. And the price is the price. Our competitors really probably can’t do that. They don’t have the scale to do that. And then at the top end, we are working a lot of times collaborative with our customers to get to the right solution and the right planning. We are thinking a lot about labor mix management. What’s the ratio of journeymen to apprentices, wiremen, what’s the foremen mix going to be on the job, what’s the experience level of those foremen, how many of our core people are we going to have on the job versus travelers. All of those things go into thinking about how we price the job, how we build contingency and then finally, how eventually we execute that job. I mean it’s a lot of things going into it that we are at the high end over these last 2 years or 3 years, and quite frankly, based on our guidance, we see no reason that, that’s not going to continue.

And then one last one on margins for me, I know you advise on not thinking about the business on a quarter-to-quarter basis. But typically, you folks can see – and typically, you do see a step-up 2Q versus 1Q in margins. Any puts and takes around that normal cadence that we see, should we…

In all seriousness, Adam, we don’t think about the business that way. We can’t. We have 12,000 projects, give or take, 10,000 projects to 12,000 projects. They start, they close. We have contingency being released after we get more certainty on completion of the job and completion of our labor estimates. And so there is too many moving parts. I think what we say is if you look over a – we would say now, Jason…

To the 24 months period…

Yes, three quarters to five quarters, give or take, you will get a pretty accurate view of how the business is actually performing. And that band of margin expectation is what could actually happen in any quarter. It could be on the upside of that. It could be in the middle of that, maybe on the lower end of it. And none of that really has to do with the underlying fundamentals of the business. That’s why we encourage you to look over sort of three quarters to five quarters to get a real view on what’s happening with our margins.

Great. Thanks so much.

Thanks Adam.

Thank you. This concludes our question-and-answer session. I would now like to turn the conference back over to our CEO, Tony Guzzi, for closing remarks.

Yes. Look, I often think about what’s the simple message on the quarter. And I think it’s important to summarize because there is a lot of macroeconomic noise out there. And so how we think about it is, we are not going to sit here and make a lot of excuses. We are going to operate in the environment that we feel that we are in, and we are going to make contingency plans. We are going to share best practices. We are going to do everything we can to drive the productivity up on our labor because that’s something we can control. We believe sitting here today that we have the impact of the tariffs in our guidance. We thought carefully about that. That’s why we have a range. That may be why we didn’t take the lower end of as much as some of you would have liked us to. But quite frankly, we probably wouldn’t have done that anyway this early in the year, and that’s in any macroeconomic environment. And when we talk about the uncertain macroeconomic environment, I would just caution you, I haven’t worked in a certain macroeconomic environment in almost my 15 years here as CEO. There has been lots of puts and takes and ups and downs, and you take the steel and aluminum tariffs, I think we are seven for seven with President since 1974 that have done something with the steel and aluminum market when they are President, and we are well rehearsed in how to do that. And quite frankly, COVID sharpened that sword of for us much more on how we can react. And we started planning on maybe supply chain and tariffs and all of those things because we sort of paid attention to who won the…

Thanks Tony and thanks Jason. And thank you all for joining us today. As always, if you have any follow-up questions, please don’t hesitate to reach out to me directly. Thank you all again and have a great day. And Sagar, will you please close the call.

Thank you. This conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.