SEC Form 10-Q filed by EMCOR Group Inc.

10/31/24 7:32:41 AM ET

$EME

Engineering & Construction

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-8267


EMCOR Group, Inc.
(Exact Name of Registrant as Specified in Its Charter)


Delaware		11-2125338
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)
301 Merritt Seven
Norwalk,	Connecticut	06851-1092
(Address of Principal Executive Offices)		(Zip Code)


(203)			849-7800
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

EME

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Applicable Only To Corporate Issuers

Number of shares of Common Stock outstanding as of the close of business on October 25, 2024: 46,002,059 shares.

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EMCOR Group, Inc.

TABLE OF CONTENTS


		PAGE
PART I. - Financial Information.
Item 1.	Financial Statements.
	Consolidated Balance Sheets - as of September 30, 2024 and December 31, 2023	1
	Condensed Consolidated Statements of Operations - three and nine months ended September 30, 2024 and 2023	2
	Condensed Consolidated Statements of Comprehensive Income - three and nine months ended September 30, 2024 and 2023	3
	Condensed Consolidated Statements of Cash Flows - nine months ended September 30, 2024 and 2023	4
	Condensed Consolidated Statements of Equity - three months ended September 30, 2024 and 2023	5
	Condensed Consolidated Statements of Equity - nine months ended September 30, 2024 and 2023	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	38
Item 4.	Controls and Procedures.	39
PART II. - Other Information.
Item 1.	Legal Proceedings.	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	40
Item 4.	Mine Safety Disclosures.	40
Item 5.	Other Information.	40
Item 6.	Exhibits.	41

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FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They generally contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” variations of such wording and other words or phrases of similar meaning. Forward-looking statements in this report include discussions of our future operating or financial performance and other forward-looking commentary regarding aspects of our business, including market share growth, gross profit, remaining performance obligations, project mix, projects with varying profit margins and contractual terms, selling, general and administrative expenses, our ability to maintain a strong safety record, and trends in our business, and other characterizations of future events or circumstances, such as the effects of supply chain disruptions and delays. Each forward-looking statement included in this report is subject to risks and uncertainties, including those identified in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, and other sections of this report, and in our Form 10-K for the year ended December 31, 2023, including, without limitation, the “Risk Factors” section of such Form 10-K. Applicable risks and uncertainties include, but are not limited to:

•adverse effects of general economic conditions;

•domestic and international political developments and/or conflicts;

•changes in the specific markets for EMCOR’s services;

•adverse business conditions, including scarcity of skilled labor, productivity challenges, the nature and extent of supply chain disruptions impacting availability and pricing of materials, and inflationary trends more generally, including fluctuations in energy costs;

•the impact of legislation and/or government regulations;

•changes in interest rates;

•the availability of adequate levels of surety bonding;

•increased competition;

•adverse outcomes in connection with legal proceedings, claims, lawsuits, or governmental investigations;

•unfavorable developments in the mix of our business; and

•other factors discussed elsewhere in this report.

Such risks and uncertainties could cause actual results to differ materially from those that might be anticipated from, or projected or implied by, our forward-looking statements. Accordingly, these statements do not guarantee future performance or events. The forward-looking statements contained in this report speak only as of the filing date of this report. We undertake no obligation to update any forward-looking statements unless required by law. However, any further disclosures made on related subjects in our subsequent reports filed with the Securities and Exchange Commission (the “SEC”) should be consulted. We caution investors not to place undue reliance on forward-looking statements, due to their inherent uncertainty.

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PART I. – FINANCIAL INFORMATION.

ITEM 1. FINANCIAL STATEMENTS.

EMCOR Group, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	(Unaudited) September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,035,534	$	789,750
Accounts receivable, less allowance for credit losses of $32,702 and $22,502, respectively	3,509,202		3,203,490
Contract assets	296,523		269,885
Inventories	94,475		110,774
Prepaid expenses and other	70,681		73,072
Total current assets	5,006,415		4,446,971
Property, plant, and equipment, net	204,547		179,378
Operating lease right-of-use assets	322,912		310,498
Goodwill	1,002,218		956,549
Identifiable intangible assets, net	648,123		586,032
Other assets	137,737		130,293
Total assets	$	7,321,952	$	6,609,721
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	897,059	$	935,967
Contract liabilities	1,881,444		1,595,109
Accrued payroll and benefits	753,680		596,936
Other accrued expenses and liabilities	312,799		315,107
Operating lease liabilities, current	80,245		75,236
Total current liabilities	3,925,227		3,518,355
Operating lease liabilities, long-term	269,517		259,430
Other long-term obligations	368,089		361,121
Total liabilities	4,562,833		4,138,906
Equity:
EMCOR Group, Inc. stockholders’ equity:
Preferred stock, $0.10 par value, 1,000,000 shares authorized, zero issued and outstanding	—		—
Common stock, $0.01 par value, 200,000,000 shares authorized, 61,175,811 and 61,094,042 shares issued, respectively	612		611
Capital surplus	96,939		91,813
Accumulated other comprehensive loss	(76,279)		(85,704)
Retained earnings	4,497,430		3,814,439
Treasury stock, at cost 15,178,383 and 14,046,777 shares, respectively	(1,760,620)		(1,351,381)
Total EMCOR Group, Inc. stockholders’ equity	2,758,082		2,469,778
Noncontrolling interests	1,037		1,037
Total equity	2,759,119		2,470,815
Total liabilities and equity	$	7,321,952	$	6,609,721

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Revenues	$	3,696,924	$	3,207,598	$	10,796,097	$	9,143,652
Cost of sales	2,962,198		2,662,126		8,788,061		7,672,058
Gross profit	734,726		545,472		2,008,036		1,471,594
Selling, general and administrative expenses	371,188		308,139		1,051,737		882,684
Impairment loss on long-lived assets	—		2,350		—		2,350
Operating income	363,538		234,983		956,299		586,560
Net periodic pension income (cost)	227		(284)		670		(840)
Interest income (expense), net	8,312		(90)		21,959		(4,614)
Income before income taxes	372,077		234,609		978,928		581,106
Income tax provision	101,814		64,863		263,944		159,292
Net income including noncontrolling interests	270,263		169,746		714,984		421,814
Net income attributable to noncontrolling interests	—		337		—		337
Net income attributable to EMCOR Group, Inc.	$	270,263	$	169,409	$	714,984	$	421,477

Basic earnings per common share	$	5.83	$	3.59	$	15.27	$	8.88

Diluted earnings per common share	$	5.80	$	3.57	$	15.21	$	8.85

Dividends declared per common share	$	0.25	$	0.18	$	0.68	$	0.51

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Net income including noncontrolling interests	$	270,263	$	169,746	$	714,984	$	421,814
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	8,933		(5,368)		7,962		503
Post-retirement plans, amortization of actuarial loss included in net income (1)	497		538		1,463		1,591
Other comprehensive income (loss)	9,430		(4,830)		9,425		2,094
Comprehensive income	279,693		164,916		724,409		423,908
Comprehensive income attributable to noncontrolling interests	—		337		—		337
Comprehensive income attributable to EMCOR Group, Inc.	$	279,693	$	164,579	$	724,409	$	423,571

_________

(1)Net of tax of $0.2 million for each of the three months ended September 30, 2024 and 2023, and net of tax of $0.5 million for each of the nine months ended September 30, 2024 and 2023.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)(Unaudited)


	Nine months ended September 30,
	2024		2023
Cash flows - operating activities:
Net income including noncontrolling interests	$	714,984	$	421,814
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	41,799		38,444
Amortization of identifiable intangible assets	56,559		49,335
Provision for credit losses	12,585		5,256
Non-cash expense for impairment of long-lived assets	—		2,350
Non-cash share-based compensation expense	16,170		10,703
Other reconciling items	(7,893)		(9,121)
Changes in operating assets and liabilities, excluding the effect of businesses acquired	104,198		(42,884)
Net cash provided by operating activities	938,402		475,897
Cash flows - investing activities:
Payments for acquisitions of businesses, net of cash acquired	(189,208)		(89,741)
Proceeds from sale or disposal of property, plant, and equipment	2,765		12,015
Purchases of property, plant, and equipment	(57,244)		(56,306)
Net cash used in investing activities	(243,687)		(134,032)
Cash flows - financing activities:
Proceeds from revolving credit facility	—		100,000
Repayments of revolving credit facility	—		(100,000)
Repayments of long-term debt	—		(142,813)
Repayments of finance lease liabilities	(2,144)		(2,138)
Dividends paid to stockholders	(31,884)		(24,198)
Repurchases of common stock	(405,425)		(105,299)
Taxes paid related to net share settlements of equity awards	(12,095)		(5,365)
Issuances of common stock under employee stock purchase plan	943		6,769
Payments for contingent consideration arrangements	(4,427)		(3,113)
Net cash used in financing activities	(455,032)		(276,157)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	7,377		856
Increase in cash, cash equivalents, and restricted cash	247,060		66,564
Cash, cash equivalents, and restricted cash at beginning of year (1)	789,750		457,068
Cash, cash equivalents, and restricted cash at end of period (2)	$	1,036,810	$	523,632

_________

(1)Includes $0.6 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheet as of December 31, 2022.

(2)Includes $1.3 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheet as of September 30, 2024.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the three months ended September 30, 2023 and 2024

(In thousands)(Unaudited)


			EMCOR Group, Inc. Stockholders
	Total		Common stock		Capital surplus		Accumulated other comprehensive loss (1)		Retained earnings		Treasury stock		Noncontrolling interests
Balance, June 30, 2023	$	2,118,087	$	611	$	81,556	$	(86,527)	$	3,450,553	$	(1,328,808)	$	702
Net income including noncontrolling interests	169,746		—		—		—		169,409		—		337
Other comprehensive loss	(4,830)		—		—		(4,830)		—		—		—
Tax withholding for common stock issued under share-based compensation plans	(70)		—		(70)		—		—		—		—
Common stock issued under employee stock purchase plan	2,328		—		2,328		—		—		—		—
Common stock dividends	(8,484)		—		36		—		(8,520)		—		—
Repurchases of common stock (2)	24		—		—		—		—		24		—
Share-based compensation expense	3,168		—		3,168		—		—		—		—
Balance, September 30, 2023	$	2,279,969	$	611	$	87,018	$	(91,357)	$	3,611,442	$	(1,328,784)	$	1,039

Balance, June 30, 2024	$	2,745,597	$	612	$	92,434	$	(85,709)	$	4,238,867	$	(1,501,644)	$	1,037
Net income including noncontrolling interests	270,263		—		—		—		270,263		—		—
Other comprehensive income	9,430		—		—		9,430		—		—		—
Tax withholding for common stock issued under share-based compensation plans	(329)		—		(329)		—		—		—		—
Common stock dividends	(11,665)		—		35		—		(11,700)		—		—
Repurchases of common stock	(258,976)		—		—		—		—		(258,976)		—
Share-based compensation expense	4,799		—		4,799		—		—		—		—
Balance, September 30, 2024	$	2,759,119	$	612	$	96,939	$	(76,279)	$	4,497,430	$	(1,760,620)	$	1,037

_________

(1)Represents cumulative foreign currency translation adjustments and post-retirement liability adjustments.

(2)Represents adjustment to estimate of excise tax on net share repurchases. Estimates of excise tax are subject to change in subsequent quarters, particularly if the amount of our share issuances exceed our share repurchases, thereby reducing the estimated excise tax due for the annual period.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the nine months ended September 30, 2023 and 2024

(In thousands)(Unaudited)


			EMCOR Group, Inc. Stockholders
	Total		Common stock		Capital surplus		Accumulated other comprehensive loss (1)		Retained earnings		Treasury stock		Noncontrolling interests
Balance, December 31, 2022	$	1,974,291	$	609	$	74,795	$	(93,451)	$	3,214,281	$	(1,222,645)	$	702
Net income including noncontrolling interests	421,814		—		—		—		421,477		—		337
Other comprehensive income	2,094		—		—		2,094		—		—		—
Common stock issued under share-based compensation plans	—		2		(2)		—		—		—		—
Tax withholding for common stock issued under share-based compensation plans	(5,365)		—		(5,365)		—		—		—		—
Common stock issued under employee stock purchase plan	6,769		—		6,769		—		—		—		—
Common stock dividends	(24,198)		—		118		—		(24,316)		—		—
Repurchases of common stock	(106,139)		—		—		—		—		(106,139)		—
Share-based compensation expense	10,703		—		10,703		—		—		—		—
Balance, September 30, 2023	$	2,279,969	$	611	$	87,018	$	(91,357)	$	3,611,442	$	(1,328,784)	$	1,039

Balance, December 31, 2023	$	2,470,815	$	611	$	91,813	$	(85,704)	$	3,814,439	$	(1,351,381)	$	1,037
Net income including noncontrolling interests	714,984		—		—		—		714,984		—		—
Other comprehensive income	9,425		—		—		9,425		—		—		—
Common stock issued under share-based compensation plans	—		1		(1)		—		—		—		—
Tax withholding for common stock issued under share-based compensation plans	(12,095)		—		(12,095)		—		—		—		—
Common stock issued under employee stock purchase plan	943		—		943		—		—		—		—
Common stock dividends	(31,884)		—		109		—		(31,993)		—		—
Repurchases of common stock	(409,239)		—		—		—		—		(409,239)		—
Share-based compensation expense	16,170		—		16,170		—		—		—		—
Balance, September 30, 2024	$	2,759,119	$	612	$	96,939	$	(76,279)	$	4,497,430	$	(1,760,620)	$	1,037

_________

(1)Represents cumulative foreign currency translation adjustments and post-retirement liability adjustments.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. References to the “Company,” “EMCOR,” “we,” “us,” “our,” and similar words refer to EMCOR Group, Inc. and its consolidated subsidiaries unless the context indicates otherwise. Readers of this report should refer to the consolidated financial statements and the notes thereto included in our latest Annual Report on Form 10-K filed with the Securities and Exchange Commission.

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of those of a normal recurring nature) necessary to present fairly our financial position and the results of our operations.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024.

NOTE 2 - New Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued an Accounting Standards Update (“ASU”), which expands the required disclosure for reportable segments. This guidance requires entities to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all segment disclosures which are currently required annually. This ASU additionally requires entities to disclose the title and position of the individual or the name of the group or committee identified as its chief operating decision-maker. Such guidance, which is required to be applied retrospectively, is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, although early adoption is permitted. While the adoption of this ASU will not have an impact on our financial position and/or results of operations, we are currently evaluating the impact to our segment disclosures.

In December 2023, the FASB issued an ASU intended to enhance the transparency and decision-usefulness of income tax disclosures. Such guidance requires entities to provide additional information within their income tax rate reconciliation, including further disclosure of federal, state, and foreign income taxes and to provide more details about these reconciling items if a quantitative threshold is met. This guidance additionally requires expanded disclosure of income taxes paid, including amounts paid for federal, state, and foreign taxes. This ASU, which is required to be applied prospectively, is effective for fiscal years beginning after December 15, 2024, although early adoption and retrospective application is permitted. While the adoption of this ASU will not have an impact on our financial position and/or results of operations, we are currently evaluating the impact on our income tax disclosures, including the processes and controls around the collection of this information.

NOTE 3 - Revenue from Contracts with Customers

The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services by applying the following five step model:

(1) Identify the contract with a customer

A contract with a customer exists when: (a) the parties have approved the contract and are committed to perform their respective obligations, (b) the rights of the parties can be identified, (c) payment terms can be identified, (d) the arrangement has commercial substance, and (e) collectability of consideration is probable. Judgment is required when determining if the contractual criteria are met, specifically in the earlier stages of a project when a formally executed contract may not yet exist. In these situations, the Company evaluates all relevant facts and circumstances, including the existence of other forms of documentation or historical experience with our customers that may indicate a contractual agreement is in place and revenue should be recognized. In determining if the collectability of consideration is probable, the Company considers the customer’s ability and intention to pay such consideration through an evaluation of several factors, including an assessment of the creditworthiness of the customer and our prior collection history with such customer.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

(2) Identify the performance obligations in the contract

At contract inception, the Company assesses the goods or services promised in a contract and identifies, as a separate performance obligation, each distinct promise to transfer goods or services to the customer. The identified performance obligations represent the “unit of account” for purposes of determining revenue recognition. In order to properly identify separate performance obligations, the Company applies judgment in determining whether each good or service provided is: (a) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (b) distinct within the context of the contract, whereby the transfer of the good or service to the customer is separately identifiable from other promises in the contract.

In addition, when assessing performance obligations within a contract, the Company considers the warranty provisions included within such contract. To the extent the warranty terms provide the customer with an additional service, other than assurance that the promised good or service complies with agreed upon specifications, such warranty is accounted for as a separate performance obligation. In determining whether a warranty provides an additional service, the Company considers each warranty provision in comparison to warranty terms which are standard in the industry.

Our contracts are often modified through change orders to account for changes in the scope and price of the goods or services we are providing. Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of our change orders are for goods or services that are not distinct within the context of our original contract and, therefore, are not treated as separate performance obligations.

(3) Determine the transaction price

The transaction price represents the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to our customers. The consideration promised within a contract may include fixed amounts, variable amounts, or both. To the extent the performance obligation includes variable consideration, including contract bonuses and penalties that can either increase or decrease the transaction price, the Company estimates the amount of variable consideration to be included in the transaction price utilizing one of two prescribed methods, depending on which method better predicts the amount of consideration to which the entity will be entitled. Such methods include: (a) the expected value method, whereby the amount of variable consideration to be recognized represents the sum of probability-weighted amounts in a range of possible consideration amounts, and (b) the most likely amount method, whereby the amount of variable consideration to be recognized represents the single most likely amount in a range of possible consideration amounts. When applying these methods, the Company considers all information that is reasonably available, including historical, current, and estimates of future performance. The expected value method is typically utilized in situations where a contract contains a large number of possible outcomes while the most likely amount method is typically utilized in situations where a contract has only two possible outcomes.

Variable consideration is included in the transaction price only to the extent it is probable, in the Company’s judgment, that a significant future reversal in the amount of cumulative revenue recognized under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved. This threshold is referred to as the variable consideration constraint. In assessing whether to apply the variable consideration constraint, the Company considers if factors exist that could increase the likelihood or the magnitude of a potential reversal of revenue, including, but not limited to, whether: (a) the amount of consideration is highly susceptible to factors outside of the Company’s influence, such as the actions of third parties, (b) the uncertainty surrounding the amount of consideration is not expected to be resolved for a long period of time, (c) the Company’s experience with similar types of contracts is limited or that experience has limited predictive value, (d) the Company has a practice of either offering a broad range of price concessions or changing the payment terms and conditions of similar contracts in similar circumstances, and (e) the contract has a large number and broad range of possible consideration amounts.

Pending change orders represent one of the most common forms of variable consideration included within contract value and typically represent contract modifications for which a change in scope has been authorized or acknowledged by our customer but the final adjustment to contract price is yet to be negotiated. In estimating the transaction price for pending change orders, the Company considers all relevant facts, including documented correspondence with the customer regarding acknowledgment of and/or agreement with the modification, as well as historical experience with the customer or similar contractual circumstances. Based upon this assessment, the Company estimates the transaction price, including whether the variable consideration constraint should be applied.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Contract claims are another form of variable consideration which is common within our industry. Claim amounts represent revenue that has been recognized for contract modifications that are not submitted or are in dispute as to both scope and price. In estimating the transaction price for claims, the Company considers all relevant facts available. However, given the uncertainty surrounding claims, including the potential long-term nature of dispute resolution and the broad range of possible consideration amounts, there is an increased likelihood that any additional contract revenue associated with contract claims is constrained. The resolution of claims involves negotiations and, in certain cases, litigation. In the event litigation costs are incurred by us in connection with claims, such litigation costs are expensed as incurred, although we may seek to recover these costs.

For some transactions, the receipt of consideration does not match the timing of the transfer of goods or services to the customer. For such contracts, the Company evaluates whether this timing difference represents a financing arrangement within the contract. Although rare, if a contract is determined to contain a significant financing component, the Company adjusts the promised amount of consideration for the effects of the time value of money when determining the transaction price of such contract. Although our customers may retain a portion of the contract price until completion of the project and final contract settlement, these retainage amounts are not considered a significant financing component as the intent of the withheld amounts is to provide the customer with assurance that we will complete our obligations under the contract rather than to provide financing to the customer. In addition, although we may be entitled to advanced payments from our customers on certain contracts, these advanced payments generally do not represent a significant financing component as the payments are used to meet working capital demands that can be higher in the early stages of a contract, as well as to protect us from our customer failing to meet its obligations under the contract.

Changes in the estimates of transaction prices are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. Such changes in estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior periods. Such changes in estimates may also result in the reversal of previously recognized revenue if the ultimate outcome differs from the Company’s previous estimate.

(4) Allocate the transaction price to the performance obligations in the contract

For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative standalone selling price. The Company determines the standalone selling price based on the price at which the performance obligation would have been sold separately in similar circumstances to similar customers. If the standalone selling price is not observable, the Company estimates the standalone selling price taking into account all available information such as market conditions and internal pricing guidelines. In certain circumstances, the standalone selling price is determined using an expected profit margin on anticipated costs related to the performance obligation.

(5) Recognize revenue as performance obligations are satisfied

The Company recognizes revenue at the time the related performance obligation is satisfied by transferring a promised good or service to its customers. A good or service is considered to be transferred when the customer obtains control. The Company can transfer control of a good or service and satisfy its performance obligations either over time or at a point in time. The Company transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time if one of the following three criteria are met: (a) the customer simultaneously receives and consumes the benefits provided by the Company’s performance as we perform, (b) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (c) the Company’s performance does not create an asset with an alternative use to us, and we have an enforceable right to payment for performance completed to date.

For our performance obligations satisfied over time, we recognize revenue by measuring the progress toward complete satisfaction of that performance obligation. The selection of the method to measure progress towards completion can be either an input method or an output method and requires judgment based on the nature of the goods or services to be provided.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For our construction contracts, revenue is generally recognized over time as our performance creates or enhances an asset that the customer controls as it is created or enhanced. Our fixed price construction projects generally use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. For our unit price construction contracts, progress towards complete satisfaction is measured through an output method, such as the number of units produced or delivered, when our performance does not produce significant amounts of work in process or finished goods prior to complete satisfaction of such performance obligations.

For our services contracts, revenue is also generally recognized over time as the customer simultaneously receives and consumes the benefits of our performance as we perform the service. For our fixed price service contracts with specified service periods, revenue is generally recognized on a straight-line basis over such service period when our inputs are expended evenly and the customer receives and consumes the benefits of our performance throughout the contract term.

The timing of revenue recognition for the manufacturing of new build heat exchangers within our United States industrial services segment depends on the payment terms of the contract, as our performance does not create an asset with an alternative use to us. For those contracts for which we have a right to payment for performance completed to date at all times throughout our performance, inclusive of a cancellation, we recognize revenue over time. For these performance obligations, we use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. However, for those contracts for which we do not have a right, at all times, to payment for performance completed to date, we recognize revenue at the point in time when control is transferred to the customer. For bill-and-hold arrangements, revenue is recognized when the customer obtains control of the heat exchanger, which may be prior to shipping if certain recognition criteria are met.

For certain of our revenue streams, such as call-out repair and service work, outage services, refinery turnarounds, and specialty welding services that are performed under time and materials contracts, our progress towards complete satisfaction of such performance obligations is measured using an output method as the customer receives and consumes the benefits of our performance completed to date.

Changes in Estimates

Due to uncertainties inherent in the estimation process, as well as the significant judgment involved in determining variable consideration, it is possible that estimates of costs to complete a performance obligation, and/or our estimates of transaction prices, will be revised in the near term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, or changes in the estimate of transaction prices, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicates a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.

Based on an evaluation of individual projects that were substantially complete in prior periods but had revisions to total estimated cost or anticipated contract value that resulted in an increase to profitability in excess of $1.0 million, we recognized revenue during the three and nine months ended September 30, 2024 and 2023, as summarized in the following table (in thousands):


	For the three months ended September 30,				For the nine months ended September 30,
	2024		2023		2024		2023
United States electrical construction and facilities services	$	7,540	$	4,223	$	9,457	$	4,287
United States mechanical construction and facilities services	5,672		5,814		9,351		18,353
Total impact	$	13,212	$	10,037	$	18,808	$	22,640

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Included in our results for the nine months ended September 30, 2024 was $12.3 million of gross profit, recognized in the second quarter of the year, on two contracts, which are currently in process, as a result of favorable developments on certain claims. Of this amount, $8.4 million was reported within our United States electrical construction and facilities services segment and $3.9 million was reported within our United States mechanical construction and facilities services segment.

Based on an evaluation of individual projects that had revisions to total estimated costs or anticipated contract value that resulted in a reduction of profitability in excess of $1.0 million, our operating results were negatively impacted during the three and nine months ended September 30, 2024 and 2023, as summarized in the following table (in thousands):


	For the three months ended September 30,				For the nine months ended September 30,
	2024		2023		2024		2023
United States electrical construction and facilities services	$	—	$	2,635	$	16,758	$	12,219
United States mechanical construction and facilities services	10,066		7,933		23,863		13,416
United States building services	—		—		—		2,977
Total impact	$	10,066	$	10,568	$	40,621	$	28,612

Disaggregation of Revenues

Our revenues are principally derived from contracts to provide construction services relating to electrical and mechanical systems, as well as to provide a number of building services and industrial services to our customers. Our contracts are with many different customers in numerous industries.

The following tables provide further disaggregation of our revenues, by categories we use to evaluate our financial performance within each of our reportable segments, for the three and nine months ended September 30, 2024 and 2023 (in thousands, except for percentages). Refer to Note 14 - Segment Information of the notes to consolidated financial statements for additional information on how we disaggregate our revenues by reportable segment.


	For the three months ended September 30,
	2024		% of Total		2023		% of Total
United States electrical construction and facilities services:
Network and communications market sector	$	367,555	43	%	$	236,454	34	%
Commercial market sector	70,366		8	%	104,270		15	%
Manufacturing and industrial market sector	109,528		13	%	97,788		14	%
Healthcare market sector	62,102		7	%	62,126		9	%
High-tech manufacturing market sector	48,960		6	%	33,482		5	%
Institutional market sector	51,504		6	%	37,916		6	%
Transportation market sector	47,720		6	%	43,287		6	%
Water and wastewater market sector	8,038		1	%	6,327		1	%
Hospitality and entertainment market sector	16,835		2	%	16,708		2	%
Short-duration projects (1)	48,225		6	%	43,481		6	%
Service work	15,231		2	%	15,927		2	%
	846,064				697,766
Less intersegment revenues	(1,034)				(360)
Total segment revenues	$	845,030			$	697,406

________

(1)Represents those projects which generally are completed within three months or less.

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)


	For the three months ended September 30,
	2024		% of Total		2023		% of Total
United States mechanical construction and facilities services:
Network and communications market sector	$	221,700	13	%	$	102,630	8	%
Commercial market sector	243,629		15	%	283,659		21	%
Manufacturing and industrial market sector	176,127		11	%	178,123		13	%
Healthcare market sector	152,851		9	%	123,025		9	%
High-tech manufacturing market sector	388,084		23	%	255,229		19	%
Institutional market sector	136,218		8	%	89,215		7	%
Transportation market sector	13,834		1	%	10,168		1	%
Water and wastewater market sector	74,478		5	%	65,219		5	%
Hospitality and entertainment market sector	20,272		1	%	14,716		1	%
Short-duration projects (1)	71,085		4	%	81,851		6	%
Service work	165,540		10	%	128,912		10	%
	1,663,818				1,332,747
Less intersegment revenues	(1,607)				(3,147)
Total segment revenues	$	1,662,211			$	1,329,600

________

(1)Represents those projects which generally are completed within three months or less.


	For the three months ended September 30,
	2024		% of Total		2023		% of Total
United States building services:
Mechanical services	$	599,371	75	%	$	542,371	66	%
Commercial site-based services	151,852		19	%	222,499		27	%
Government site-based services	45,700		6	%	52,848		7	%
Total segment revenues	$	796,923			$	817,718


	For the three months ended September 30,
	2024		% of Total		2023		% of Total
United States industrial services:
Field services	$	251,552	88	%	$	214,341	85	%
Shop services	34,858		12	%	37,807		15	%
Total segment revenues	$	286,410			$	252,148

Total United States operations	$	3,590,574			$	3,096,872


	For the three months ended September 30,
	2024		% of Total		2023		% of Total
United Kingdom building services:
Service work	$	49,530	47	%	$	54,286	49	%
Project work	56,820		53	%	56,440		51	%
Total segment revenues	$	106,350			$	110,726

Total operations	$	3,696,924			$	3,207,598

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)


	For the nine months ended September 30,
	2024		% of Total		2023		% of Total
United States electrical construction and facilities services:
Network and communications market sector	$	1,002,116	42	%	$	665,493	33	%
Commercial market sector	233,365		10	%	295,188		15	%
Manufacturing and industrial market sector	313,454		13	%	278,912		14	%
Healthcare market sector	177,059		7	%	182,442		9	%
High-tech manufacturing market sector	137,306		6	%	102,075		5	%
Institutional market sector	128,075		5	%	112,577		5	%
Transportation market sector	147,701		6	%	118,436		6	%
Water and wastewater market sector	23,337		1	%	18,388		1	%
Hospitality and entertainment market sector	55,143		2	%	56,510		3	%
Short-duration projects (1)	150,508		6	%	141,901		7	%
Service work	44,789		2	%	50,080		2	%
	2,412,853				2,022,002
Less intersegment revenues	(3,118)				(1,683)
Total segment revenues	$	2,409,735			$	2,020,319

________

(1)Represents those projects which generally are completed within three months or less.


	For the nine months ended September 30,
	2024		% of Total		2023		% of Total
United States mechanical construction and facilities services:
Network and communications market sector	$	527,404	11	%	$	289,085	8	%
Commercial market sector	775,767		16	%	828,809		23	%
Manufacturing and industrial market sector	568,502		12	%	485,809		13	%
Healthcare market sector	426,275		9	%	353,595		10	%
High-tech manufacturing market sector	1,075,890		23	%	549,678		15	%
Institutional market sector	360,602		8	%	224,889		6	%
Transportation market sector	43,496		1	%	31,615		1	%
Water and wastewater market sector	224,921		5	%	201,167		6	%
Hospitality and entertainment market sector	49,902		1	%	38,324		1	%
Short-duration projects (1)	253,916		5	%	237,246		7	%
Service work	443,055		9	%	368,378		10	%
	4,749,730				3,608,595
Less intersegment revenues	(4,673)				(6,324)
Total segment revenues	$	4,745,057			$	3,602,271

________

(1)Represents those projects which generally are completed within three months or less.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)


	For the nine months ended September 30,
	2024		% of Total		2023		% of Total
United States building services:
Mechanical services	$	1,695,254	72	%	$	1,519,410	65	%
Commercial site-based services	522,353		22	%	639,193		28	%
Government site-based services	141,584		6	%	159,502		7	%
Total segment revenues	$	2,359,191			$	2,318,105


	For the nine months ended September 30,
	2024		% of Total		2023		% of Total
United States industrial services:
Field services	$	837,224	87	%	$	751,062	86	%
Shop services	127,286		13	%	124,252		14	%
Total segment revenues	$	964,510			$	875,314

Total United States operations	$	10,478,493			$	8,816,009


	For the nine months ended September 30,
	2024		% of Total		2023		% of Total
United Kingdom building services:
Service work	$	150,534	47	%	$	157,631	48	%
Project work	167,070		53	%	170,012		52	%
Total segment revenues	$	317,604			$	327,643

Total operations	$	10,796,097			$	9,143,652

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recognized in the period we deliver goods and services to our customers or when our right to consideration is unconditional. The Company maintains an allowance for credit losses to reduce outstanding receivables to their net realizable value. Judgment is required when determining expected credit losses. Estimates of such losses are recorded when we believe a customer, or group of customers, may not be able to meet their financial obligations due to deterioration in financial condition or credit rating. Factors relevant to our assessment include our prior collection history with our customers, the related aging of past due balances, projections of credit losses based on historical trends in credit quality indicators or past events, and forecasts of future economic conditions. In addition to monitoring delinquent accounts, management reviews the credit quality of its receivables by, among other things, obtaining credit ratings of significant customers, assessing economic and market conditions, and evaluating material changes to a customer’s business, cash flows, and financial condition.

At September 30, 2024 and December 31, 2023, our allowance for credit losses was $32.7 million and $22.5 million, respectively. The increase in our allowance for credit losses was primarily due to a reserve taken in the first quarter of 2024 for a specific customer bankruptcy within the commercial site-based services division of our United States building services segment. Allowances for credit losses are based on the best facts available and are reassessed and adjusted on a regular basis as additional information is received. Should anticipated collections fail to materialize, or if future economic conditions compare unfavorably to our forecasts, we could experience an increase in our credit losses.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

The change in the allowance for credit losses for the nine months ended September 30, 2024 was as follows (in thousands):


Balance at December 31, 2023	$	22,502
Provision for credit losses	12,585
Amounts written off against the allowance, net of recoveries	(2,385)
Balance at September 30, 2024	$	32,702

Contract Assets and Contract Liabilities

The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from our construction projects when revenues recognized under the cost-to-cost measure of progress exceed the amounts invoiced to our customers, as the amounts are not yet billable under the terms of our contracts. Such amounts are recoverable from our customers based upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. In addition, many of our time and materials arrangements, as well as our contracts to perform turnaround services within the United States industrial services segment, are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded as revenue is recognized in advance of billings.

Also included in contract assets are amounts we seek or will seek to collect from customers or others for errors or changes in contract specifications or design, contract change orders or modifications in dispute or unapproved as to scope and/or price, or other customer-related causes of unanticipated additional contract costs (claims and unapproved change orders). Our contract assets do not include capitalized costs to obtain and fulfill a contract. Contract assets are generally classified as current within the Consolidated Balance Sheets.

Contract liabilities from our construction contracts arise when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost measure of progress. Contract liabilities additionally include advanced payments from our customers on certain contracts. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and are recorded as either current or long-term, depending upon when we expect to recognize such revenue. The long-term portion of contract liabilities is included in “Other long-term obligations” in the Consolidated Balance Sheets.

Net contract liabilities in the accompanying Consolidated Balance Sheets consisted of the following amounts as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Contract assets, current	$	296,523	$	269,885
Contract assets, non-current	—		—
Contract liabilities, current	(1,881,444)		(1,595,109)
Contract liabilities, non-current	(1,995)		(1,812)
Net contract liabilities	$	(1,586,916)	$	(1,327,036)

Contract assets and contract liabilities increased by approximately $3.3 million and $29.5 million, respectively, as a result of acquisitions made by us in 2024. Excluding the impact of acquisitions, net contract liabilities increased by approximately $233.6 million during the nine months ended September 30, 2024, primarily due to an increase in net contract liabilities on our uncompleted construction projects, partially as a result of the timing of invoicing to our customers as we continue to effectively manage our working capital. There was no significant impairment of contract assets recognized during the periods presented.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentages of total remaining performance obligations as of September 30, 2024 (in thousands, except for percentages):


	September 30, 2024		% of Total
Remaining performance obligations:
United States electrical construction and facilities services	$	2,767,672	28	%
United States mechanical construction and facilities services	5,362,689		55	%
United States building services	1,334,163		14	%
United States industrial services	110,583		1	%
Total United States operations	9,575,107		98	%
United Kingdom building services	214,345		2	%
Total operations	$	9,789,452	100	%

Our remaining performance obligations at September 30, 2024 were approximately $9.79 billion. Remaining performance obligations increase with awards of new contracts and decrease as we perform work and recognize revenue on existing contracts. We include a project within our remaining performance obligations at such time the project is awarded and agreement on contract terms has been reached. Our remaining performance obligations include amounts related to contracts for which a fixed price contract value is not assigned when a reasonable estimate of the total transaction price can be made.

Remaining performance obligations include unrecognized revenues to be realized from uncompleted construction contracts. Although many of our construction contracts are subject to cancellation at the election of our customers, in accordance with industry practice, we do not limit the amount of unrecognized revenue included within remaining performance obligations for these contracts as the risk of cancellation is very low due to the inherent substantial economic penalty that our customers would incur upon cancellation or termination. We believe our reported remaining performance obligations for our construction contracts are firm and contract cancellations have not had a material adverse effect on us.

Remaining performance obligations also include unrecognized revenues expected to be realized over the remaining term of service contracts. However, to the extent a service contract includes a cancellation clause which allows for the termination of such contract by either party without a substantive penalty, the remaining contract term, and therefore, the amount of unrecognized revenues included within remaining performance obligations, is limited to the notice period required for the termination.

Our remaining performance obligations are comprised of: (a) original contract amounts, (b) change orders for which we have received written confirmations from our customers, (c) pending change orders for which we expect to receive confirmations in the ordinary course of business, (d) claim amounts that we have made against customers for which we have determined we have a legal basis under existing contractual arrangements and as to which the variable consideration constraint does not apply, and (e) other forms of variable consideration to the extent that such variable consideration has been included within the transaction price of our contracts. Such claim and other variable consideration amounts were immaterial for all periods presented.

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Refer to the table below for additional information regarding our remaining performance obligations, including an estimate of when we expect to recognize such remaining performance obligations as revenue (in thousands):


	Within one year		Greater than one year
Remaining performance obligations:
United States electrical construction and facilities services	$	2,263,240	$	504,432
United States mechanical construction and facilities services	4,483,395		879,294
United States building services	1,208,377		125,786
United States industrial services	110,583		—
Total United States operations	8,065,595		1,509,512
United Kingdom building services	175,644		38,701
Total operations	$	8,241,239	$	1,548,213

NOTE 4 - Acquisitions of Businesses

Acquisitions are accounted for utilizing the acquisition method of accounting and the prices paid for them are allocated to their respective assets and liabilities based upon the estimated fair value of such assets and liabilities at the dates of their respective acquisition by us.

During the first nine months of 2024, we acquired five companies for upfront consideration of $192.3 million, inclusive of customary working capital adjustments. These acquisitions are comprised of: (a) two companies that have been included within our United States mechanical construction and facilities services segment, including: (i) a leading plumbing services provider in the Southeast region of the United States and (ii) a full service provider of mechanical construction and maintenance services in Central Texas, (b) two companies that have been included in our United States building services segment, including: (i) a provider of building automation and controls solutions in the Northeast region of the United States and (ii) a mechanical services contractor in the Western region of the United States, and (c) an instrumentation and electrical contractor, that has been included in our United States industrial services segment, which provides electrical, automation, digital integration, and fabrication services to various energy sector and process equipment customers. In connection with these acquisitions, we acquired working capital of $26.8 million and other net assets of $1.2 million, and have preliminarily ascribed $45.7 million to goodwill and $118.6 million to identifiable intangible assets. We expect that all of the goodwill and identifiable intangible assets acquired in connection with these 2024 acquisitions will be deductible for tax purposes.

Subsequent to September 30, 2024, we entered into a definitive agreement to acquire an electrical contractor in the Southeast region of the United States for upfront consideration of approximately $33.6 million. This transaction is expected to close in the fourth quarter of 2024, subject to customary closing conditions.

During calendar year 2023, we acquired eight companies for total consideration of $99.6 million. Such acquisitions include: (a) a national energy efficiency specialty services firm, the results of operations of which have been included in our United States building services segment, and (b) seven companies, the results of operations of which were de minimis, consisting of: (i) three companies that have been included within our United States mechanical construction and facilities services segment, one of which provides mechanical and pipe fabrication services in the Midwestern region of the United States, and two of which add capabilities to our national fire protection services, and (ii) four mechanical services companies in the Western and Midwestern regions of the United States that have been included within our United States building services segment and enhance our presence in geographies where we have existing operations. In connection with these acquisitions, we acquired working capital of $9.1 million and other net liabilities of $6.1 million, including certain deferred tax liabilities, and have ascribed $37.4 million to goodwill and $59.2 million to identifiable intangible assets. We expect that $29.6 million of the goodwill and identifiable intangible assets acquired in connection with these 2023 acquisitions will be deductible for tax purposes.

The purchase price allocations for the businesses acquired in 2024 are preliminary and subject to change during their respective measurement periods. As we finalize such purchase price allocations, adjustments may be recorded relating to finalization of intangible asset valuations, tax matters, or other items. Although not expected to be significant, such adjustments may result in changes in the valuation of assets and liabilities acquired. The purchase price allocations for the businesses acquired in 2023 have been finalized during their respective measurement periods with an insignificant impact.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 5 - Earnings Per Share

Calculation of Basic and Diluted Earnings per Common Share

The following tables summarize our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the three and nine months ended September 30, 2024 and 2023 (in thousands, except share and per share data):


	For the three months ended September 30,
	2024		2023
Numerator:
Net income attributable to EMCOR Group, Inc.	$	270,263	$	169,409
Denominator:
Weighted average shares outstanding used to compute basic earnings per common share	46,394,857		47,173,974
Effect of dilutive securities—Share-based awards	193,903		224,223
Shares used to compute diluted earnings per common share	46,588,760		47,398,197

Basic earnings per common share	$	5.83	$	3.59

Diluted earnings per common share	$	5.80	$	3.57


	For the nine months ended September 30,
	2024		2023
Numerator:
Net income attributable to EMCOR Group, Inc.	$	714,984	$	421,477
Denominator:
Weighted average shares outstanding used to compute basic earnings per common share	46,829,458		47,446,298
Effect of dilutive securities—Share-based awards	186,614		196,465
Shares used to compute diluted earnings per common share	47,016,072		47,642,763

Basic earnings per common share	$	15.27	$	8.88

Diluted earnings per common share	$	15.21	$	8.85

There were no anti-dilutive share-based awards for the three months ended September 30, 2024. The number of share-based awards excluded from the computation of diluted EPS for the nine months ended September 30, 2024 because they would be anti-dilutive were 8,950. The number of share-based awards excluded from the computation of diluted EPS for the three and nine months ended September 30, 2023 because they would be anti-dilutive were 400 and 800, respectively.

NOTE 6 - Inventories

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Raw materials and construction materials	$	87,128	$	94,447
Work in process	7,347		16,327
Inventories	$	94,475	$	110,774

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 7 - Debt

Excluding finance lease liabilities of $6.3 million at September 30, 2024 and $5.3 million at December 31, 2023, we had no outstanding debt as of September 30, 2024 and December 31, 2023. The current portion of our finance lease liabilities of $2.3 million and $2.5 million at September 30, 2024 and December 31, 2023, respectively, was included in “Other accrued expenses and liabilities” and the non-current portion of our finance lease liabilities of $4.0 million and $2.8 million at September 30, 2024 and December 31, 2023, respectively, were included in “Other long-term obligations” in the accompanying Consolidated Balance Sheets.

Credit Agreement

We have a credit agreement dated December 20, 2023 (the “2023 Credit Agreement”), which provides for a $1.3 billion revolving credit facility (the “2023 Revolving Credit Facility”) expiring December 20, 2028. If additional lenders are identified and/or existing lenders are willing to increase their current commitments, we may increase the 2023 Revolving Credit Facility by an amount equal to the greater of: (a) $900 million or (b) the Company’s Adjusted EBITDA (as such term is defined in the 2023 Credit Agreement) for the twelve-month period ending immediately prior to the increase in commitment. We may allocate up to $600.0 million of available capacity under the 2023 Revolving Credit Facility to letters of credit for our account or for the account of any of our subsidiaries.

There were no direct borrowings outstanding under the 2023 Revolving Credit Facility as of September 30, 2024 and December 31, 2023. However, outstanding letters of credit reduce the available capacity under this facility, and as of September 30, 2024 and December 31, 2023, we had $74.9 million and $116.7 million of letters of credit outstanding, respectively.

At the Company’s election, borrowings under the 2023 Revolving Credit Facility bear interest at either: (1) a base rate plus a margin of 0.125% to 0.875%, depending on the Company’s Leverage Ratio (as such term is defined in the 2023 Credit Agreement), or (2) a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for the applicable tenor plus 0.10% (“Adjusted Term SOFR”) plus a margin of 1.125% to 1.875%, depending on the Company’s Leverage Ratio. The base rate is determined by the greater of: (a) the prime commercial lending rate announced by Bank of Montreal from time to time, (b) the federal funds effective rate, plus ½ of 1.00%, (c) Adjusted Term SOFR for a one-month tenor, plus 1.00%, or (d) 0.00%.

A commitment fee is payable on the average daily unused amount of the 2023 Revolving Credit Facility, which ranges from 0.125% to 0.25%, depending on the Company’s Leverage Ratio. The fee was 0.125% of the unused amount as of September 30, 2024 and December 31, 2023. Fees for letters of credit issued under the 2023 Revolving Credit Facility range from 0.85% to 1.875% of the respective face amounts of outstanding letters of credit, depending on the nature of the letter of credit, and are computed depending on the Company’s Leverage Ratio.

Obligations under the 2023 Credit Agreement are guaranteed by most of our direct and indirect subsidiaries and are secured by substantially all of our assets. The 2023 Credit Agreement contains customary covenants providing for, among other things, the maintenance of certain financial ratios and certain limitations on the payment of dividends, common stock repurchases, investments, acquisitions, indebtedness, and capital expenditures. We were in compliance with all such covenants as of September 30, 2024 and December 31, 2023.

NOTE 8 - Fair Value Measurements

For disclosure purposes, we utilize a fair value hierarchy to categorize qualifying assets and liabilities into three broad levels based on the priority of the inputs used to determine their fair values. The hierarchy, which gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs, is comprised of the following three levels:

Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2 – Observable inputs, other than Level 1 inputs, that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Significant unobservable inputs that reflect the reporting entity’s own assumptions.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 8 - Fair Value Measurements (Continued)

Recurring Fair Value Measurements

The following tables summarize the assets and liabilities carried at fair value measured on a recurring basis as of September 30, 2024 and December 31, 2023 (in thousands):


	Assets at Fair Value as of September 30, 2024
Asset Category	Level 1		Level 2		Level 3		Total
Cash and cash equivalents (1)	$	1,035,534	$	—	$	—	$	1,035,534
Deferred compensation plan assets (2)	59,502		—		—		59,502
Restricted cash (3)	1,276		—		—		1,276
Total	$	1,096,312	$	—	$	—	$	1,096,312

_________________________

(1)Cash and cash equivalents consist of deposit accounts and money market funds with original maturity dates of three months or less, which are Level 1 assets. At September 30, 2024, we had $779.5 million in money market funds. From time to time, we have cash balances in certain of our domestic bank accounts that exceed federally insured limits.

(2)Deferred compensation plan assets are classified as “Other assets” in the Consolidated Balance Sheets.

(3)Restricted cash is classified as “Prepaid expenses and other” in the Consolidated Balance Sheets. Restricted cash represents cash held in account for use on customer contracts.


	Assets at Fair Value as of December 31, 2023
Asset Category	Level 1		Level 2		Level 3		Total
Cash and cash equivalents (1)	$	789,750	$	—	$	—	$	789,750
Deferred compensation plan assets (2)	47,315		—		—		47,315
Total	$	837,065	$	—	$	—	$	837,065

_________________________

(1)Cash and cash equivalents consist of deposit accounts and money market funds with original maturity dates of three months or less, which are Level 1 assets. At December 31, 2023, we had $497.3 million in money market funds. From time to time, we have cash balances in certain of our domestic bank accounts that exceed federally insured limits.

(2)Deferred compensation plan assets are classified as “Other assets” in the Consolidated Balance Sheets.

Nonrecurring Fair Value Measurements

We have recorded goodwill and identifiable intangible assets in connection with our business acquisitions. Such assets are measured at fair value at the time of acquisition based on valuation techniques that appropriately represent the methods which would be used by other market participants in determining fair value. In addition, goodwill, intangible assets, and certain other long-lived assets are tested for impairment using similar valuation methodologies to determine the fair value of such assets. Periodically, we engage an independent third-party valuation specialist to assist with the valuation process, including the selection of appropriate methodologies and the development of market-based assumptions. The inputs used for these nonrecurring fair value measurements represent Level 3 inputs.

Fair Value of Financial Instruments

We believe that the carrying values of our financial instruments, which include accounts receivable and other financing commitments, approximate their fair values due primarily to their short-term maturities and low risk of counterparty default. Although there were no outstanding borrowings under our 2023 Credit Agreement as of September 30, 2024 and December 31, 2023, the carrying value of any debt associated with this agreement would approximate its fair value due to the variable rate on such debt.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 9 - Income Taxes

The following table presents our income tax provision and our income tax rate for the three and nine months ended September 30, 2024 and 2023 (in thousands, except percentages):


	For the three months ended September 30,						For the nine months ended September 30,
	2024			2023			2024			2023
Income tax provision	$	101,814		$	64,863		$	263,944		$	159,292
Income tax rate	27.4		%	27.7		%	27.0		%	27.4		%

The difference between the U.S. statutory tax rate of 21% and our effective income tax rate for both the three and nine months ended September 30, 2024 and 2023 was primarily a result of state and local income taxes and other permanent book-to-tax differences.

The increase in our income tax provision for the three and nine months ended September 30, 2024, when compared to the three and nine months ended September 30, 2023, was predominantly due to greater income before income taxes.

As of September 30, 2024 and December 31, 2023, we had no unrecognized income tax benefits.

We file a consolidated federal income tax return including all of our U.S. subsidiaries with the Internal Revenue Service. We additionally file income tax returns with various state, local, and foreign tax agencies. Our income tax returns are subject to audit by various taxing authorities and are currently under examination for the years 2021 and 2022.

NOTE 10 - Common Stock

As of September 30, 2024 and December 31, 2023, there were 45,997,428 and 47,047,265 shares of our common stock outstanding, respectively.

During the three months ended September 30, 2024 and 2023, we issued 1,190 and 11,838 shares of common stock, respectively. During the nine months ended September 30, 2024 and 2023, we issued 81,769 and 126,492 shares of common stock, respectively. These shares were issued upon either the satisfaction of required conditions under our share-based compensation plans or the purchase of common stock pursuant to our employee stock purchase plan, prior to the discontinuation of such employee stock purchase plan at the end of 2023.

We have paid quarterly dividends since October 25, 2011. We currently pay a regular quarterly dividend of $0.25 per share.

In September 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to begin repurchasing shares of our outstanding common stock. Subsequently, the Board has from time to time increased the amount authorized for repurchases under such program. In June 2024, our Board increased such amount by $500 million. Since the inception of the repurchase program, the Board has authorized us to repurchase up to $2.65 billion of our outstanding common stock. During the nine months ended September 30, 2024, we repurchased approximately 1.1 million shares of our common stock for approximately $409.2 million, inclusive of the applicable excise tax. Since the inception of the repurchase program through September 30, 2024, we have repurchased approximately 26.9 million shares of our common stock for approximately $2.30 billion. As of September 30, 2024, there remained authorization for us to repurchase approximately $351.8 million of our shares. The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of common stock, and may be suspended, recommenced, or discontinued at any time or from time to time without prior notice. We may repurchase our shares from time to time to the extent permitted by securities laws and other legal requirements, including provisions in our 2023 Credit Agreement placing limitations on such repurchases.

NOTE 11 - Retirement Plans

The funded status of our defined benefit plans, which represents the difference between the fair value of plan assets and the projected benefit obligations, is recognized in the Consolidated Balance Sheets with a corresponding adjustment to accumulated other comprehensive income (loss). Gains and losses for the differences between actuarial assumptions and actual results are recognized through accumulated other comprehensive income (loss). These amounts will be subsequently recognized as net periodic pension cost (income) within the Consolidated Statements of Operations.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 11 - Retirement Plans (Continued)

Our United Kingdom subsidiary has a defined benefit pension plan covering all eligible employees (the “UK Plan”); however, no individual joining the company after October 31, 2001 may participate in the UK Plan. On May 31, 2010, we curtailed the future accrual of benefits for active employees under such plan.

We also sponsor three domestic retirement plans in which participation by new individuals is frozen. Amounts related to these domestic retirement plans were de minimis for all periods presented.

Components of Net Periodic Pension Cost

The components of net periodic pension (income) cost of the UK Plan for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands):


	For the three months ended September 30,				For the nine months ended September 30,
	2024		2023		2024		2023
Interest cost	$	2,435	$	2,472	$	7,173	$	7,299
Expected return on plan assets	(3,311)		(2,903)		(9,756)		(8,572)
Amortization of unrecognized loss	668		664		1,969		1,961
Net periodic pension (income) cost	$	(208)	$	233	$	(614)	$	688

NOTE 12 - Commitments and Contingencies

Severance Agreements

We have agreements with our executive officers and certain other key management personnel providing for severance benefits for such employees upon termination of their employment under certain circumstances.

Guarantees

In the ordinary course of business, we, at times, guarantee obligations of our subsidiaries under certain contracts. Generally, we are liable under such an arrangement only if our subsidiary fails to perform its obligations under the contract. Historically, we have not incurred any substantial liabilities as a consequence of these guarantees.

Surety Bonds

The terms of our construction contracts frequently require that we obtain from surety companies, and provide to our customers, surety bonds as a condition to the award of such contracts. These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts. We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf. As of September 30, 2024, based on the percentage-of-completion of our projects covered by surety bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $2.4 billion, which represents approximately 25% of our total remaining performance obligations.

We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future.

Hazardous Materials

We are subject to regulation with respect to the handling or disposal of certain materials used in the performance of our services, which are classified as hazardous or toxic by federal, state, and local agencies. Our practice is to avoid participation in projects principally involving the remediation or removal of such materials. However, when remediation is required as part of our contract performance, we believe we comply with all applicable regulations governing the discharge of hazardous materials into the environment or otherwise relating to the protection of the environment.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12 - Commitments and Contingencies (Continued)

Government Contracts

When we perform work as a federal government contractor/subcontractor or when we perform work on a project that has received federal government funding, we are subject to U.S. government audits and investigations relating to our operations, which such audits may result in fines, penalties and compensatory and treble damages, and possible suspension or debarment from doing business with the government. Based on currently available information, we believe the outcome of ongoing government disputes and investigations will not have a material impact on our financial position, results of operations, or liquidity.

Legal Proceedings

We are involved in several legal proceedings in which damages and claims have been asserted against us. We believe that we have a number of valid defenses to such proceedings and claims and intend to vigorously defend ourselves. We additionally maintain insurance coverage for certain of these matters, although these policies do not cover all possible claims and certain of the policies are subject to large deductibles and retentions. We do not believe that any such matters will have a material adverse effect on our financial position, results of operations, or liquidity. We record a loss contingency if we consider the potential loss from a proceeding or claim probable and we are able to reasonably estimate the amount or can reasonably determine a range of loss. We provide disclosure when we believe a loss in excess of any recorded provision is reasonably possible. Significant judgment is required in these determinations. As additional information becomes available, we reassess prior determinations and may change our estimates. Additional claims may be asserted against us in the future. Litigation is subject to many uncertainties, and the outcome of litigation is not predictable with assurance. A litigation matter for which liabilities have not been recorded could be decided unfavorably to us, and any such unfavorable decision could have a material adverse effect on our financial position, results of operations, or liquidity.

Insurance Liabilities

We have loss payment deductibles for certain workers’ compensation, automobile liability, general liability, and property claims, have self-insured retentions for certain other casualty claims, and are self-insured for employee-related healthcare claims. In addition, we maintain a wholly-owned captive insurance subsidiary to manage certain of our insurance liabilities. Losses are recorded based upon estimates of our liability for claims incurred and for claims incurred but not reported. The liabilities are derived from known facts, historical trends, and industry averages, utilizing the assistance of an independent third-party actuary to determine the best estimate for the majority of these obligations. To the extent that the amount required to settle claims covered by insurance continues to increase, the cost of our insurance coverage, including premiums and deductibles, is likely to increase. As of September 30, 2024 and December 31, 2023, the estimated current portion of such undiscounted insurance liabilities, included in “Other accrued expenses and liabilities” in the accompanying Consolidated Balance Sheets, were $52.1 million and $51.0 million, respectively. The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” as of September 30, 2024 and December 31, 2023 were $232.3 million and $229.8 million, respectively. The current portion of anticipated insurance recoveries of $10.8 million and $11.9 million as of September 30, 2024 and December 31, 2023, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $41.9 million and $48.8 million as of September 30, 2024 and December 31, 2023, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets.

NOTE 13 - Additional Cash Flow Information

The following table presents additional cash flow information for the nine months ended September 30, 2024 and 2023 (in thousands):


	For the nine months ended September 30,
	2024		2023
Cash paid for:
Interest	$	2,143	$	13,632
Income taxes	$	298,109	$	161,070
Right-of-use assets obtained in exchange for new operating lease liabilities	$	77,353	$	99,745
Right-of-use assets obtained in exchange for new finance lease liabilities	$	2,843	$	855

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information

We are one of the largest specialty contractors in the United States and a leading provider of electrical and mechanical construction and facilities services, building services, and industrial services. Our services are provided to a broad range of commercial, technology, manufacturing, industrial, healthcare, utility, and institutional customers through approximately 100 operating subsidiaries. Such operating subsidiaries are organized into the following reportable segments:

•United States electrical construction and facilities services;

•United States mechanical construction and facilities services;

•United States building services;

•United States industrial services; and

•United Kingdom building services.

The following tables present financial information for each of our reportable segments for the three and nine months ended September 30, 2024 and 2023 (in thousands):


	For the three months ended September 30,
	2024		2023
Revenues from unrelated entities:
United States electrical construction and facilities services	$	845,030	$	697,406
United States mechanical construction and facilities services	1,662,211		1,329,600
United States building services	796,923		817,718
United States industrial services	286,410		252,148
Total United States operations	3,590,574		3,096,872
United Kingdom building services	106,350		110,726
Total operations	$	3,696,924	$	3,207,598

Total revenues:
United States electrical construction and facilities services	$	850,587	$	697,897
United States mechanical construction and facilities services	1,676,341		1,342,149
United States building services	806,448		846,400
United States industrial services	286,611		252,244
Less intersegment revenues	(29,413)		(41,818)
Total United States operations	3,590,574		3,096,872
United Kingdom building services	106,350		110,726
Total operations	$	3,696,924	$	3,207,598

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information (Continued)


	For the nine months ended September 30,
	2024		2023
Revenues from unrelated entities:
United States electrical construction and facilities services	$	2,409,735	$	2,020,319
United States mechanical construction and facilities services	4,745,057		3,602,271
United States building services	2,359,191		2,318,105
United States industrial services	964,510		875,314
Total United States operations	10,478,493		8,816,009
United Kingdom building services	317,604		327,643
Total operations	$	10,796,097	$	9,143,652

Total revenues:
United States electrical construction and facilities services	$	2,420,210	$	2,022,557
United States mechanical construction and facilities services	4,783,056		3,650,875
United States building services	2,402,598		2,397,944
United States industrial services	971,098		883,808
Less intersegment revenues	(98,469)		(139,175)
Total United States operations	10,478,493		8,816,009
United Kingdom building services	317,604		327,643
Total operations	$	10,796,097	$	9,143,652


	For the three months ended September 30,
	2024		2023
Operating income (loss):
United States electrical construction and facilities services	$	119,118	$	63,127
United States mechanical construction and facilities services	214,831		138,476
United States building services	55,562		57,156
United States industrial services	3,292		(174)
Total United States operations	392,803		258,585
United Kingdom building services	5,497		8,869
Corporate administration	(34,762)		(30,121)
Impairment loss on long-lived assets	—		(2,350)
Total operations	363,538		234,983
Other items:
Net periodic pension income (cost)	227		(284)
Interest income (expense), net	8,312		(90)
Income before income taxes	$	372,077	$	234,609

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information (Continued)


	For the nine months ended September 30,
	2024		2023
Operating income (loss):
United States electrical construction and facilities services	$	299,284	$	154,365
United States mechanical construction and facilities services	578,991		344,550
United States building services	135,860		140,943
United States industrial services	34,004		22,733
Total United States operations	1,048,139		662,591
United Kingdom building services	16,651		20,220
Corporate administration	(108,491)		(93,901)
Impairment loss on long-lived assets	—		(2,350)
Total operations	956,299		586,560
Other items:
Net periodic pension income (cost)	670		(840)
Interest income (expense), net	21,959		(4,614)
Income before income taxes	$	978,928	$	581,106


	September 30, 2024		December 31, 2023
Total assets:
United States electrical construction and facilities services	$	1,240,898	$	1,243,707
United States mechanical construction and facilities services	2,644,195		2,242,833
United States building services	1,422,089		1,382,664
United States industrial services	614,187		571,658
Total United States operations	5,921,369		5,440,862
United Kingdom building services	297,440		277,066
Corporate administration	1,103,143		891,793
Total operations	$	7,321,952	$	6,609,721

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ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Business Description

•United States electrical construction and facilities services;

•United States mechanical construction and facilities services;

•United States building services;

•United States industrial services; and

•United Kingdom building services.

We refer to our United States electrical construction and facilities services segment and our United States mechanical construction and facilities services segment together as our United States construction segments.

For a more complete description of our operations, refer to Item 1. Business of our Form 10-K for the year ended December 31, 2023.

Overview

The following table presents selected financial data for the three months ended September 30, 2024 and 2023 (in thousands, except percentages and per share data):


	For the three months ended September 30,
	2024			2023
Revenues	$	3,696,924		$	3,207,598
Revenues increase from prior year	15.3		%	13.5		%
Gross profit	$	734,726		$	545,472
Gross profit as a percentage of revenues	19.9		%	17.0		%
Operating income	$	363,538		$	234,983
Operating income as a percentage of revenues	9.8		%	7.3		%
Net income attributable to EMCOR Group, Inc.	$	270,263		$	169,409
Diluted earnings per common share	$	5.80		$	3.57

Revenues of $3.70 billion for the quarter ended September 30, 2024 set a new quarterly record for the Company and represent an increase of 15.3% from revenues of $3.21 billion for the quarter ended September 30, 2023. Demand for our services continues to be strong across most of the market sectors we serve and, as described in further detail below, we experienced revenue growth within the majority of our reportable segments. Revenues for the third quarter of 2024 included incremental acquisition contribution of approximately $84.9 million.

Operating income for the quarter ended September 30, 2024 was $363.5 million, or 9.8% of revenues, establishing new quarterly records for the Company with respect to both operating income and operating margin. This compares to operating income of $235.0 million, or 7.3% of revenues, for the quarter ended September 30, 2023. The $128.6 million increase in operating income, and corresponding 250 basis point expansion in operating margin, were predominantly a result of improved operating performance within our United States construction segments, as described in further detail below. Operating income for the quarter ended September 30, 2024 included incremental acquisition contribution of $5.5 million, net of amortization expense attributable to identifiable intangible assets of $4.6 million.

Net income of $270.3 million, or $5.80 per diluted share, for the quarter ended September 30, 2024 compares favorably to net income of $169.4 million, or $3.57 per diluted share, for the quarter ended September 30, 2023. While the majority of the increase in our diluted earnings per share was a result of the increased operating income referenced above, diluted earnings per share for the quarter ended September 30, 2024 additionally benefited from a reduced weighted average share count given the impact of common stock repurchases made by us throughout 2023 and the first nine months of 2024.

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Impact of Acquisitions

In order to provide a more meaningful period-over-period discussion of our operating results, we may discuss amounts generated or incurred (revenues, gross profit, selling, general and administrative expenses, and operating income) from companies acquired. The amounts discussed reflect the acquired companies’ operating results in the current reported period only for the time period these entities were not owned by EMCOR in the comparable prior reported period. For further discussion regarding our acquisitions, refer to Note 4 - Acquisitions of Businesses of the notes to consolidated financial statements.

We acquired five companies during the first nine months of 2024 for upfront consideration of $192.3 million, inclusive of customary working capital adjustments. These acquisitions are comprised of: (a) two companies that have been included within our United States mechanical construction and facilities services segment, including: (i) a leading plumbing services provider in the Southeast region of the United States and (ii) a full service provider of mechanical construction and maintenance services in Central Texas, (b) two companies that have been included in our United States building services segment, including: (i) a provider of building automation and controls solutions in the Northeast region of the United States and (ii) a mechanical services contractor in the Western region of the United States, and (c) an instrumentation and electrical contractor, that has been included in our United States industrial services segment, which provides electrical, automation, digital integration, and fabrication services to various energy sector and process equipment customers.

We acquired eight companies during calendar year 2023 for total consideration of $99.6 million. Such acquisitions include: (a) a national energy efficiency specialty services firm, the results of operations of which have been included in our United States building services segment, and (b) seven companies, the results of operations of which were de minimis, consisting of: (i) three companies that have been included within our United States mechanical construction and facilities services segment, one of which provides mechanical and pipe fabrication services in the Midwestern region of the United States, and two of which add capabilities to our national fire protection services, and (ii) four mechanical services companies in the Western and Midwestern regions of the United States that have been included within our United States building services segment and enhance our presence in geographies where we have existing operations.

Results of Operations

Revenues

The following tables present our operating segment revenues from unrelated entities and their respective percentages of total revenues (in thousands, except for percentages):


	For the three months ended September 30,
	2024		% of Total		2023		% of Total
Revenues:
United States electrical construction and facilities services	$	845,030	23	%	$	697,406	22	%
United States mechanical construction and facilities services	1,662,211		45	%	1,329,600		41	%
United States building services	796,923		21	%	817,718		26	%
United States industrial services	286,410		8	%	252,148		8	%
Total United States operations	3,590,574		97	%	3,096,872		97	%
United Kingdom building services	106,350		3	%	110,726		3	%
Total operations	$	3,696,924	100	%	$	3,207,598	100	%


	For the nine months ended September 30,
	2024		% of Total		2023		% of Total
Revenues:
United States electrical construction and facilities services	$	2,409,735	22	%	$	2,020,319	22	%
United States mechanical construction and facilities services	4,745,057		44	%	3,602,271		39	%
United States building services	2,359,191		22	%	2,318,105		25	%
United States industrial services	964,510		9	%	875,314		10	%
Total United States operations	10,478,493		97	%	8,816,009		96	%
United Kingdom building services	317,604		3	%	327,643		4	%
Total operations	$	10,796,097	100	%	$	9,143,652	100	%

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As described below in more detail, our consolidated revenues for the three months ended September 30, 2024 increased to $3.70 billion compared to $3.21 billion for the three months ended September 30, 2023, and our consolidated revenues for the nine months ended September 30, 2024 increased to $10.80 billion compared to $9.14 billion for the nine months ended September 30, 2023.

Revenues of our United States electrical construction and facilities services segment were $845.0 million and $2,409.7 million for the three and nine months ended September 30, 2024, respectively, compared to revenues of $697.4 million and $2,020.3 million for the three and nine months ended September 30, 2023, respectively. The increase in this segment’s revenues for both 2024 periods was primarily a result of growth within the network and communications market sector, predominantly due to our data center projects. Increased demand for cloud computing and data storage, driven in part by the emergence of artificial intelligence, has resulted in a greater number of construction project opportunities for us in several of the geographies in which we operate. In addition, this segment benefited from revenue growth within a number of the other market sectors in which we operate, such as: (a) the high-tech manufacturing market sector, inclusive of construction projects for customers engaged in the design and manufacturing of semiconductors, (b) the institutional market sector, given increased project revenues from certain schools and universities, (c) the manufacturing and industrial market sector, driven by increased activity with various energy sector customers, and (d) the transportation market sector, due to certain infrastructure projects currently underway. These increases were partially offset by a reduction in revenues within the commercial market sector due in part to reduced demand across the commercial real estate industry.

Our United States mechanical construction and facilities services segment revenues for the three months ended September 30, 2024 were $1,662.2 million, a $332.6 million increase compared to revenues of $1,329.6 million for the three months ended September 30, 2023. Revenues of this segment for the nine months ended September 30, 2024 were $4,745.1 million, a $1,142.8 million increase compared to revenues of $3,602.3 million for the nine months ended September 30, 2023. This segment’s results included $59.9 million and $116.0 million of incremental acquisition revenues for the three and nine months ended September 30, 2024, respectively. Excluding the impact of acquisitions, the increases in this segment’s revenues were attributable to revenue growth within the majority of the market sectors in which we operate, as well as greater levels of service work. For both the three and nine months ended September 30, 2024, this segment experienced notable increases in revenues within: (a) the high-tech manufacturing market sector, as a result of stronger demand for our mechanical construction and/or fire protection services by certain customers: (i) engaged in either the design and manufacturing of semiconductors or the production and development of electric vehicles and/or lithium batteries and (ii) within the biotech, life-sciences, and pharmaceutical industries, (b) the network and communications market sector, due to increased data center project activity as this segment benefited from the same market demand described above within our United States electrical construction and facilities services segment, (c) the institutional market sector, given several public sector projects which were active during the first nine months of 2024, (d) the healthcare market sector, due to an increase in projects throughout several of the regions in which we operate, and (e) the water and wastewater market sector, driven by construction activity on several projects within the Southeast region of the United States. Revenues of this segment for the nine months ended September 30, 2024 additionally benefited from increased activity within the manufacturing and industrial market sector, as a result of the re-shoring of critical supply chain by certain of our customers as well as an increase in food processing construction projects. Partially offsetting these increases was a reduction in revenues within the commercial market sector, largely as a result of the completion of various warehouse and distribution projects, which were active in 2023.

Revenues of our United States building services segment for the three months ended September 30, 2024 were $796.9 million compared to revenues of $817.7 million for the three months ended September 30, 2023. Excluding incremental revenues from acquired companies of $7.7 million, this segment’s revenues for the three months ended September 30, 2024 decreased by $28.5 million. Revenues of this segment for the nine months ended September 30, 2024 were $2,359.2 million compared to revenues of $2,318.1 million for the nine months ended September 30, 2023. Excluding incremental revenues from acquired companies of $28.6 million, this segment’s revenues for the nine months ended September 30, 2024 increased by $12.5 million. Within both 2024 periods, this segment’s mechanical services division experienced increased revenues from: (a) HVAC project and retrofit work, as a result of greater: (i) project execution stemming from the increased availability of materials and equipment when compared to the prior year period, which experienced greater supply chain disruptions and delays, and (ii) demand for system upgrades and replacements, partially as our customers continue to seek ways to improve the energy efficiency or indoor air quality of their facilities, (b) service repair and maintenance volumes, given growth in our service contract base, and (c) building automation and controls projects, as we continue to expand our service offerings in this area. Offsetting this revenue growth in both 2024 periods were declines in revenues within this segment’s commercial site-based services and government site-based services divisions due to the loss of certain facilities maintenance contracts not renewed pursuant to rebid.

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Revenues of our United States industrial services segment for the three months ended September 30, 2024 were $286.4 million, compared to revenues of $252.1 million for the three months ended September 30, 2023. Revenues of this segment for the nine months ended September 30, 2024 were $964.5 million, compared to revenues of $875.3 million for the nine months ended September 30, 2023. This segment’s results for the three and nine months ended September 30, 2024 included $17.4 million and $29.1 million, respectively, of incremental revenues from an acquired company. Excluding such acquisition contribution, the increase in this segment’s revenues for both 2024 periods resulted from its field services division due to greater demand, including turnarounds of a larger size and scope growth on certain projects.

Our United Kingdom building services segment revenues were $106.4 million and $317.6 million for the three and nine months ended September 30, 2024, respectively, compared to revenues of $110.7 million and $327.6 million for the three and nine months ended September 30, 2023, respectively. The decrease in this segment’s revenues for both 2024 periods was primarily a result of the loss of certain facilities maintenance contracts not renewed pursuant to rebid. Revenues of this segment for the three and nine months ended September 30, 2024 were positively impacted by $2.8 million and $8.0 million, respectively, as a result of favorable exchange rate movements for the British pound versus the United States dollar.

Cost of sales and gross profit

The following table presents our cost of sales, gross profit (revenues less cost of sales), and gross profit as a percentage of revenues (“gross profit margin”) (in thousands, except for percentages):


	For the three months ended September 30,						For the nine months ended September 30,
	2024			2023			2024			2023
Cost of sales	$	2,962,198		$	2,662,126		$	8,788,061		$	7,672,058
Gross profit	$	734,726		$	545,472		$	2,008,036		$	1,471,594
Gross profit margin	19.9		%	17.0		%	18.6		%	16.1		%

Our gross profit for the three months ended September 30, 2024 was $734.7 million, or 19.9% of revenues, compared to gross profit of $545.5 million, or 17.0% of revenues, for the three months ended September 30, 2023. Gross profit for the nine months ended September 30, 2024 was $2,008.0 million, or 18.6% of revenues, compared to gross profit of $1,471.6 million, or 16.1% of revenues, for the nine months ended September 30, 2023. The increase in gross profit and the expansion in gross profit margin for both 2024 periods were driven by each of our domestic reportable segments due to an improved revenue mix, excellent project execution, and/or favorable pricing. Our gross profit for the three and nine months ended September 30, 2024 included incremental acquisition contribution of $15.6 million and $32.2 million, respectively, net of amortization expense attributable to identifiable intangible assets of $2.9 million and $5.9 million, respectively.

Selling, general and administrative expenses

The following table presents our selling, general and administrative expenses (“SG&A”) and selling, general and administrative expenses as a percentage of revenues (“SG&A margin”) (in thousands, except for percentages):


	For the three months ended September 30,						For the nine months ended September 30,
	2024			2023			2024			2023
Selling, general and administrative expenses	$	371,188		$	308,139		$	1,051,737		$	882,684
SG&A margin	10.0		%	9.6		%	9.7		%	9.7		%

Our selling, general and administrative expenses for the three months ended September 30, 2024 were $371.2 million, or 10.0% of revenues, compared to selling, general and administrative expenses of $308.1 million, or 9.6% of revenues, for the three months ended September 30, 2023. Selling, general and administrative expenses for the nine months ended September 30, 2024 were $1,051.7 million, or 9.7% of revenues, compared to selling, general and administrative expenses of $882.7 million, or 9.7% of revenues, for the nine months ended September 30, 2023. Selling, general and administrative expenses for the three and nine months ended September 30, 2024 included $10.2 million and $23.3 million, respectively, of incremental expenses directly related to companies acquired in 2024 and 2023, including amortization expense attributable to identifiable intangible assets of $1.7 million and $4.8 million, respectively.

Excluding incremental expenses from businesses acquired, the increase in selling, general and administrative expenses for both 2024 periods was predominantly attributable to greater: (a) salaries and related employment expenses, largely as a result of additional headcount to support our organic revenue growth as well as annual cost of living adjustments, and (b) incentive compensation expense across our reportable segments, due to higher projected annual operating results.

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While our SG&A margin for the nine months ended September 30, 2024 was consistent with that for the nine months ended September 30, 2023, our SG&A margin for the three months ended September 30, 2024 increased by 40 basis points when compared to that for the three months ended September 30, 2023. This increase in quarterly SG&A margin was primarily a result of the true-up of our operating company incentive compensation accruals given the strong performance during the quarter, as evidenced in part by the increase in gross profit margin referenced above.

Operating income (loss)

The following tables present our operating income (loss) and operating income (loss) as a percentage of segment revenues (“operating margin”) (in thousands, except for percentages):


	For the three months ended September 30,
	2024		% of Segment Revenues		2023		% of Segment Revenues
Operating income (loss):
United States electrical construction and facilities services	$	119,118	14.1	%	$	63,127	9.1	%
United States mechanical construction and facilities services	214,831		12.9	%	138,476		10.4	%
United States building services	55,562		7.0	%	57,156		7.0	%
United States industrial services	3,292		1.1	%	(174)		(0.1)	%
Total United States operations	392,803		10.9	%	258,585		8.3	%
United Kingdom building services	5,497		5.2	%	8,869		8.0	%
Corporate administration	(34,762)		—		(30,121)		—
Impairment loss on long-lived assets	—		—		(2,350)		—
Total operations	363,538		9.8	%	234,983		7.3	%
Other items:
Net periodic pension income (cost)	227				(284)
Interest income (expense), net	8,312				(90)
Income before income taxes	$	372,077			$	234,609


	For the nine months ended September 30,
	2024		% of Segment Revenues		2023		% of Segment Revenues
Operating income (loss):
United States electrical construction and facilities services	$	299,284	12.4	%	$	154,365	7.6	%
United States mechanical construction and facilities services	578,991		12.2	%	344,550		9.6	%
United States building services	135,860		5.8	%	140,943		6.1	%
United States industrial services	34,004		3.5	%	22,733		2.6	%
Total United States operations	1,048,139		10.0	%	662,591		7.5	%
United Kingdom building services	16,651		5.2	%	20,220		6.2	%
Corporate administration	(108,491)		—		(93,901)		—
Impairment loss on long-lived assets	—		—		(2,350)		—
Total operations	956,299		8.9	%	586,560		6.4	%
Other items:
Net periodic pension income (cost)	670				(840)
Interest income (expense), net	21,959				(4,614)
Income before income taxes	$	978,928			$	581,106

Operating income for the three months ended September 30, 2024 was $363.5 million, an increase of $128.6 million compared to operating income of $235.0 million for the three months ended September 30, 2023. Operating margin for the three months ended September 30, 2024 was 9.8% compared to an operating margin of 7.3% for the three months ended September 30, 2023. For the nine months ended September 30, 2024, operating income was $956.3 million, an increase of $369.7 million compared to operating income of $586.6 million for the nine months ended September 30, 2023. Operating margin for the nine months ended September 30, 2024 was 8.9% compared to an operating margin of 6.4% for the nine months ended September 30, 2023.

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As described in more detail below, these increases in profitability were predominantly a result of improved operating performance within our United States construction segments, due to a more favorable mix of work and better project execution, including enhanced productivity, due in part to investments in virtual design and construction, prefabrication, and automation. Operating income for the three and nine months ended September 30, 2024 included incremental acquisition contribution of $5.5 million and $8.9 million, respectively, net of amortization expense attributable to identifiable intangible assets of $4.6 million and $10.7 million, respectively.

Operating income of our United States electrical construction and facilities services segment was $119.1 million, or 14.1% of revenues, for the three months ended September 30, 2024, compared to $63.1 million, or 9.1% of revenues, for the three months ended September 30, 2023. Operating income of this segment for the nine months ended September 30, 2024 was $299.3 million, or 12.4% of revenues, compared to $154.4 million, or 7.6% of revenues, for the nine months ended September 30, 2023. The increases in operating income and operating margin of this segment for both 2024 periods were a result of greater gross profit and gross profit margin from projects within the majority of the market sectors in which we operate, due to both an increase in revenues as well as a more favorable mix of work. While the most significant increase in gross profit was experienced within the network and communications market sector, this segment additionally benefited from greater gross profit recognized on projects within the institutional, manufacturing and industrial, and high-tech manufacturing market sectors.

Our United States mechanical construction and facilities services segment’s operating income for the three months ended September 30, 2024 was $214.8 million, or 12.9% of revenues, compared to operating income of $138.5 million, or 10.4% of revenues, for the three months ended September 30, 2023. Operating income of this segment for the nine months ended September 30, 2024 was $579.0 million, or 12.2% of revenues, compared to $344.6 million, or 9.6% of revenues, for the nine months ended September 30, 2023. This segment’s operating income for the three and nine months ended September 30, 2024 included incremental acquisition contribution of $4.9 million and $9.6 million, respectively, net of amortization expense attributable to identifiable intangible assets of $3.4 million and $6.9 million, respectively. Excluding the impact of acquisitions, the increases in operating income and operating margin of this segment for both 2024 periods were primarily a result of contribution from projects within: (a) the high-tech manufacturing market sector, including certain mechanical construction or fire protection projects for customers engaged in either the design or manufacturing of semiconductors or the production and development of electric vehicles and/or lithium batteries, and (b) the network and communications market sector. While the most significant increases in gross profit were seen within the above referenced market sectors, this segment also experienced increases in gross profit within the majority of the other market sectors in which we operate, including commercial, institutional, manufacturing and industrial, and healthcare.

Operating income of our United States building services segment was $55.6 million, or 7.0% of revenues, for the three months ended September 30, 2024 compared to $57.2 million, or 7.0% of revenues, for the three months ended September 30, 2023. Operating income of this segment for the nine months ended September 30, 2024 was $135.9 million, or 5.8% of revenues, compared to $140.9 million, or 6.1% of revenues, for the nine months ended September 30, 2023. For both 2024 periods, increased gross profit from this segment’s mechanical services division, due primarily to greater profitability across its portfolio of HVAC and building automation and controls projects and retrofits, was partially offset by reductions in gross profit from its commercial site-based services and government site-based services divisions, given the loss of certain facilities maintenance contracts not renewed pursuant to rebid. Operating income and operating margin for the nine months ended September 30, 2024 were negatively impacted by an $11.0 million reserve recorded during the first quarter of 2024 for a specific customer bankruptcy within this segment’s commercial site-based services division. Such reserve negatively impacted the operating margin of this segment for the first nine months of 2024 by approximately 40 basis points.

Our United States industrial services segment reported operating income of $3.3 million, or 1.1% of revenues, for the three months ended September 30, 2024, compared to an operating loss of $0.2 million, or (0.1)% of revenues, for the three months ended September 30, 2023. For the nine months ended September 30, 2024, this segment reported operating income of $34.0 million, or 3.5% of revenues, compared to operating income of $22.7 million, or 2.6% of revenues, for the nine months ended September 30, 2023. Operating income and operating margin of this segment for both 2024 periods benefited from an improvement in gross profit margin within each of its field services and shop services divisions, largely due to favorable pricing and greater indirect cost absorption.

Operating income of our United Kingdom building services segment was $5.5 million, or 5.2% of revenues, for the three months ended September 30, 2024, compared to $8.9 million, or 8.0% of revenues, for the three months ended September 30, 2023. Operating income for the nine months ended September 30, 2024 was $16.7 million, or 5.2% of revenues, compared to $20.2 million, or 6.2% of revenues, for the nine months ended September 30, 2023. The decrease in operating income and operating margin for both 2024 periods was due to a decline in gross profit and gross profit margin. In addition to the impact of lower revenues, gross profit and gross profit margin were negatively affected by a less favorable mix of work when compared to the prior year periods, which included a greater number of higher margin projects.

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Our corporate administration expenses for the three months ended September 30, 2024 were $34.8 million, compared to $30.1 million for the three months ended September 30, 2023. For the nine months ended September 30, 2024, our corporate administration expenses were $108.5 million, compared to $93.9 million for the nine months ended September 30, 2023. The increase in corporate expenses for both 2024 periods was primarily due to greater: (a) employment compensation costs, including salaries, incentive compensation, and share-based compensation, and (b) computer hardware and software costs, due to various information technology and cybersecurity initiatives currently in process. Partially contributing to the increase in corporate expenses for the first nine months of 2024 were certain severance expenses which were recorded during the first quarter of the year.

Other items

As a result of an increase in our average daily invested cash balance, coupled with the repayment, in December of 2023, of all previously outstanding borrowings under our credit facility, we generated net interest income for the three and nine months ended September 30, 2024 of $8.3 million and $22.0 million, respectively, compared to net interest expense of $0.1 million and $4.6 million for the three and nine months ended September 30, 2023, respectively.

For the three and nine months ended September 30, 2024, our income tax provision was $101.8 million and $263.9 million, respectively, compared to an income tax provision of $64.9 million and $159.3 million for the three and nine months ended September 30, 2023, respectively. Our effective income tax rate for the three and nine months ended September 30, 2024 was 27.4% and 27.0%, respectively, compared to an effective income tax rate for the three and nine months ended September 30, 2023 of 27.7% and 27.4%, respectively. Refer to Note 9 - Income Taxes of the notes to consolidated financial statements for further discussion regarding our income tax provision and effective income tax rate.

Remaining Unsatisfied Performance Obligations

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentage of total remaining performance obligations (in thousands, except for percentages):


	September 30, 2024		% of Total		December 31, 2023		% of Total		September 30, 2023		% of Total
Remaining performance obligations:
United States electrical construction and facilities services	$	2,767,672	28	%	$	2,387,844	27	%	$	2,158,104	25	%
United States mechanical construction and facilities services	5,362,689		55	%	4,940,519		56	%	4,875,551		56	%
United States building services	1,334,163		14	%	1,264,818		14	%	1,313,779		15	%
United States industrial services	110,583		1	%	113,291		1	%	133,894		2	%
Total United States operations	9,575,107		98	%	8,706,472		98	%	8,481,328		98	%
United Kingdom building services	214,345		2	%	140,949		2	%	154,115		2	%
Total operations	$	9,789,452	100	%	$	8,847,421	100	%	$	8,635,443	100	%

Our remaining performance obligations at September 30, 2024 were approximately $9.79 billion compared to approximately $8.85 billion at December 31, 2023 and approximately $8.64 billion at September 30, 2023. When compared to December 31, 2023, remaining performance obligations at September 30, 2024 increased within all of our reportable segments, with the exception of our United States industrial services segment, which experienced a modest decline. Specifically, we saw increases within: (a) our United States electrical construction and facilities services segment, largely as a result of the award of several construction contracts within the network and communications, institutional, and healthcare market sectors, (b) our United States mechanical construction and facilities services segment, which experienced increases in remaining performance obligations across the majority of the market sectors in which we operate, with the most notable project awards in the network and communications, healthcare, hospitality and entertainment, water and wastewater, and manufacturing and industrial market sectors, (c) our United States building services segment, primarily due to increased project opportunities across its mechanical services division, and (d) our United Kingdom building services segment, given new facilities maintenance contracts and an increase in project awards. Remaining performance obligations at September 30, 2024 increased by $222.4 million as a result of acquisitions made by us during 2024. Partially offsetting these increases was a decrease in remaining performance obligations within the high-tech manufacturing market sector as a result of progress made on certain projects within our United States mechanical construction and facilities services segment.

See Note 3 - Revenue from Contracts with Customers of the notes to consolidated financial statements for further disclosure regarding our remaining performance obligations.

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Liquidity and Capital Resources

The following section discusses our principal liquidity and capital resources, as well as our primary liquidity requirements and sources and uses of cash.

We are focused on the efficient conversion of operating income into cash to provide for the Company’s material cash requirements, including working capital needs, investment in our growth strategies through business acquisitions and capital expenditures, satisfaction of contractual commitments, including principal and interest payments on any outstanding indebtedness, and shareholder return through dividend payments and share repurchases. We strive to maintain a balanced approach to capital allocation in order to achieve growth, deliver value, and minimize risk.

Management monitors financial markets and overall economic conditions for factors that may affect our liquidity and capital resources and adjusts our capital allocation strategy as necessary. Negative macroeconomic trends could have an adverse effect on future liquidity if we experience delays in the payment of outstanding receivables beyond normal payment terms, an increase in credit losses, or significant increases in the price of commodities or the materials and equipment utilized for our project and service work, beyond those experienced to date. In addition, during economic downturns, there have typically been fewer small discretionary projects from the private sector and our competitors have aggressively bid larger long-term infrastructure and public sector contracts. Our liquidity is also impacted by: (a) the type and length of construction contracts in place, as performance of long duration contracts typically requires greater amounts of working capital, (b) the level of turnaround activities within our United States industrial services segment, as such projects are billed in arrears pursuant to contractual terms that are standard within the industry, and (c) the billing terms of our maintenance contracts, including those within our United States and United Kingdom building services segments. While we strive to negotiate favorable billing terms, which allow us to invoice in advance of costs incurred on certain of our contracts, there can be no assurance that such terms will be agreed to by our customers.

As of September 30, 2024, we had cash and cash equivalents, excluding restricted cash, of $1,035.5 million, which are maintained in depository accounts and highly liquid investments with original maturity dates of three months or less. Both our short-term and long-term liquidity requirements are expected to be met through our cash and cash equivalent balances, cash generated from our operations, and, as necessary, the borrowing capacity under our revolving credit facility. Our credit agreement provides for a $1.30 billion revolving credit facility, for which there was $1.23 billion of available capacity as of September 30, 2024.

Refer to Note 7 - Debt of the notes to consolidated financial statements for further information regarding our credit agreement. Based upon our current credit rating and financial position, we can also reasonably expect to be able to secure long-term debt financing if required to achieve our strategic objectives; however, no assurances can be made that such debt financing will be available on favorable terms. We believe that we have sufficient financial resources available to meet our short-term and foreseeable long-term liquidity requirements.

Cash Flows

The following table presents a summary of our operating, investing, and financing cash flows (in thousands):


	For the nine months ended September 30,
	2024		2023
Net cash provided by operating activities	$	938,402	$	475,897
Net cash used in investing activities	$	(243,687)	$	(134,032)
Net cash used in financing activities	$	(455,032)	$	(276,157)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	$	7,377	$	856
Increase in cash, cash equivalents, and restricted cash	$	247,060	$	66,564

During the nine months ended September 30, 2024, our cash balance, including cash equivalents and restricted cash, increased by approximately $247.1 million from $789.8 million at December 31, 2023 to $1,036.8 million at September 30, 2024. Changes in our cash position from December 31, 2023 to September 30, 2024 are described in further detail below.

Operating Activities – Operating cash flows generally represent our net income as adjusted for certain non-cash items and changes in assets and liabilities. Net cash provided by operating activities for the nine months ended September 30, 2024 was approximately $938.4 million compared to approximately $475.9 million for the nine months ended September 30, 2023. The favorable operating cash flow performance period-over-period was primarily a result of: (a) our improved operating performance and the corresponding increase in our net income and (b) the timing of cash receipts from our customers.

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Investing Activities – Investing cash flows consist primarily of payments for acquisition of businesses, capital expenditures, and proceeds from the sale or disposal of property, plant, and equipment. Net cash used in investing activities for the nine months ended September 30, 2024 increased by approximately $109.7 million compared to the nine months ended September 30, 2023, primarily due to an increase in payments for acquisitions.

Financing Activities – Financing cash flows consist primarily of the issuance and repayment of short-term and long-term debt, repurchases of common stock, payments of dividends to stockholders, and the issuance of common stock through certain equity plans. Net cash used in financing activities for the nine months ended September 30, 2024 was $455.0 million compared to net cash used in financing activities for the nine months ended September 30, 2023 of $276.2 million. The $178.9 million variance was primarily due to an increase in common stock repurchases made by us during the first nine months of 2024, partially offset by the impact of repayments on our outstanding debt in the prior year period. The timing of common stock repurchases is at management’s discretion subject to securities laws and other legal requirements and depends upon several factors, including market and business conditions, current and anticipated future liquidity, share price, and share availability, among others. For additional detail regarding our share repurchase program, refer to Note 10 - Common Stock of the notes to consolidated financial statements.

We currently pay a regular quarterly dividend of $0.25 per share. For the nine months ended September 30, 2024 and 2023, cash payments related to dividends were $31.9 million and $24.2 million, respectively. Our credit agreement places limitations on the payment of dividends on our common stock. However, we do not believe that the terms of such agreement currently materially limit our ability to pay such quarterly dividends for the foreseeable future.

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash – We are exposed to fluctuations in foreign currency exchange rates, almost entirely with respect to the British pound. Therefore, the $6.5 million variance between the nine months ended September 30, 2024 and 2023 was a direct result of exchange rate movements for the British pound versus the United States dollar.

Material Cash Requirements from Contractual and Other Obligations

As of September 30, 2024, our short-term and long-term material cash requirements for known contractual and other obligations were as follows:

Outstanding Debt and Interest Payments – As of September 30, 2024, there were no direct borrowings outstanding under our revolving credit facility. Interest payments on any future borrowings will be determined based on prevailing interest rates at that time. Refer to Note 7 - Debt of the notes to consolidated financial statements for further detail of our debt obligations, including our revolving credit facility.

Operating and Finance Leases – In the normal course of business, we lease real estate, vehicles, and equipment under various arrangements which are classified as either operating or finance leases. Future payments for such leases, excluding leases with initial terms of one year or less, were $398.0 million at September 30, 2024, with $95.7 million payable within the next 12 months.

Open Purchase Obligations – As of September 30, 2024, we had $2.33 billion of open purchase obligations, of which payments totaling approximately $1.92 billion are expected to become due within the next 12 months. These obligations represent open purchase orders to suppliers and subcontractors related to our construction and services contracts. These purchase orders are not reflected in the Consolidated Balance Sheets and are not expected to impact future liquidity as amounts should be recovered through customer billings.

Insurance Obligations – As described in further detail in Note 12 - Commitments and Contingencies of the notes to consolidated financial statements, we have loss payment deductibles and/or self-insured retentions for certain insurance matters. As of September 30, 2024, our insurance liabilities, net of estimated recoveries, were $231.7 million. Of this net amount, approximately $41.3 million is estimated to be payable within the next 12 months. Due to many uncertainties inherent in resolving these matters, it is not practical to estimate these payments beyond such period. To the extent that the amount required to settle claims covered by insurance continues to increase, the cost of our insurance coverage, including premiums and deductibles, is likely to increase.

Contingent Consideration Liabilities – We have incurred liabilities related to contingent consideration arrangements associated with certain acquisitions, payable in the event discrete performance objectives are achieved by the acquired businesses during designated post-acquisition periods. The aggregate amount of these liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, changes in the fair value of amounts owed based on performance during such post-acquisition periods, and accretion in present value. As of September 30, 2024, the present value of expected future payments relating to these contingent consideration arrangements was $26.3 million. Of this amount, $18.3 million is estimated as being payable within the next 12 months, with the remainder due pursuant to the terms of our contractual agreements, some of which extend into 2027.

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In addition, material cash requirements for other potential obligations, for which we cannot reasonably estimate future payments, include the following:

Legal Proceedings – We are involved in several legal proceedings in which damages and claims have been asserted against us. While litigation is subject to many uncertainties and the outcome of litigation is not predictable with assurance, we do not believe that any such matters will have a material adverse effect on our financial position, results of operations, or liquidity. Refer to Note 12 - Commitments and Contingencies of the notes to consolidated financial statements for more information regarding legal proceedings.

Multiemployer Benefit Plans – In addition to our Company sponsored benefit plans, we participate in certain multiemployer pension and other post-retirement plans. The cost of these plans is equal to the annual required contributions determined in accordance with the provisions of negotiated collective bargaining agreements. Our future contributions to the multiemployer plans are dependent upon a number of factors. Amounts of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated. Refer to Note 14 - Retirement Plans of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of our Form 10-K for the year ended December 31, 2023 for more information regarding multiemployer benefit plans.

Off-Balance Sheet Arrangements and Other Commercial Commitments

Surety bonds expire at various times ranging from final completion of a project to a period extending beyond contract completion in certain circumstances. Such amounts can also fluctuate from period to period based upon the mix and level of our bonded operating activity. For example, public sector contracts require surety bonds more frequently than private sector contracts and, accordingly, our bonding requirements typically increase as the amount of our public sector work increases. Our estimated maximum exposure as it relates to the value of the surety bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each commitment under a surety bond generally extinguishes concurrently with the expiration of its related contractual obligation.

Surety bonds are sometimes provided to secure obligations for wages and benefits payable to or for certain of our employees, at the request of labor unions representing such employees. In addition, surety bonds or letters of credit may be issued as collateral for certain insurance obligations. As of September 30, 2024, we satisfied approximately $48.1 million and $71.1 million of the collateral requirements of our insurance programs by utilizing surety bonds and letters of credit, respectively. All such letters of credit were issued under our revolving credit facility, therefore reducing the available capacity of such facility.

We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future.

From time to time, we discuss with our current and other surety bond providers the amounts of surety bonds that may be available to us based on our financial strength and the absence of any default by us on any surety bond issued on our behalf and believe those amounts are currently adequate for our needs. However, if we experience changes in our bonding relationships or if there are adverse changes in the surety industry, we may: (a) seek to satisfy certain customer requests for surety bonds by posting other forms of collateral in lieu of surety bonds, such as letters of credit, parent company guarantees, or cash, in order to convince customers to forego the requirement for surety bonds, (b) increase our activities in our businesses that rarely require surety bonds, and/or (c) refrain from bidding for certain projects that require surety bonds.

There can be no assurance that we would be able to effectuate alternatives to providing surety bonds to our customers or to obtain, on favorable terms, sufficient additional work that does not require surety bonds. Accordingly, a reduction in the availability of surety bonds could have a material adverse effect on our financial position, results of operations, and/or cash flows.

We do not have any other material financial guarantees or off-balance sheet arrangements other than those disclosed herein.

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New Accounting Pronouncements

We review new accounting standards to determine the expected impact, if any, that the adoption of such standards will have on our financial position and/or results of operations. See Note 2 - New Accounting Pronouncements of the notes to consolidated financial statements for further information regarding new accounting standards, including the anticipated dates of adoption and the effects on our consolidated financial position, results of operations, or liquidity.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements is based on the application of significant accounting policies, which require management to make estimates and assumptions. Our significant accounting policies are described further in Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of our Form 10-K for the year ended December 31, 2023. We base our estimates on historical experience, known or expected trends, third-party valuations, and various other assumptions that we believe to be reasonable under the circumstances. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. There have been no significant changes to our critical accounting policies or methods during the nine months ended September 30, 2024.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We have not used any derivative financial instruments during the nine months ended September 30, 2024, including trading or speculating on changes in interest rates or commodity prices of materials used in our business.

We are exposed to market risk for changes in interest rates for any borrowings under our revolving credit facility, which bear interest at variable rates. For further information regarding our credit facility and associated borrowing rates, refer to Note 7 - Debt of the notes to consolidated financial statements.

We are exposed to construction market risk and its potential related impact on accounts receivable or contract assets on uncompleted contracts. The amounts recorded may be at risk if our customers’ ability to pay these obligations is negatively impacted by economic conditions. We continually monitor the creditworthiness of our customers and maintain on-going discussions with customers regarding contract status with respect to change orders and billing terms. Therefore, we believe we take appropriate action to manage market and other risks, but there is no assurance that we will be able to reasonably identify all risks with respect to the collectability of these assets.

Amounts invested in our foreign operations are translated into U.S. dollars at the exchange rates in effect at the end of the period. The resulting translation adjustments are recorded as accumulated other comprehensive (loss) income, a component of equity, in the Consolidated Balance Sheets. We believe our exposure to the effects that fluctuating foreign currencies may have on our consolidated results of operations is limited because our foreign operations primarily invoice customers and collect obligations in their respective local currencies. Additionally, expenses associated with these transactions are generally contracted and paid for in their same local currencies.

In addition, we are exposed to market risk of fluctuations in certain commodity prices of materials, such as copper and steel, which are used as components of supplies or materials utilized in our construction, building services, and industrial services operations. We are also exposed to increases in energy prices, particularly as they relate to gasoline prices for our fleet of approximately 13,800 vehicles. While we believe we can increase our contract prices to adjust for some price increases in commodities, there can be no assurance that such price increases, if they were to occur, would be recoverable. Additionally, our fixed price contracts generally do not allow us to adjust our prices and, as a result, increases in material costs could reduce our profitability with respect to projects in progress.

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ITEM 4. CONTROLS AND PROCEDURES.

Based on an evaluation of our disclosure controls and procedures (as required by Rule 13a-15(b) of the Securities Exchange Act of 1934), our Chairman, President, and Chief Executive Officer, Anthony J. Guzzi, and our Senior Vice President, Chief Financial Officer and Chief Accounting Officer, Jason R. Nalbandian, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) are effective as of the end of the period covered by this report.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. – OTHER INFORMATION.

ITEM 1. LEGAL PROCEEDINGS.

The information required by this Item is incorporated by reference from Note 12 - Commitments and Contingencies of the notes to consolidated financial statements.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table summarizes repurchases of our common stock made by us during the quarter ended September 30, 2024:


Period	Total Number of Shares Purchased (1) (2)	Average Price Paid Per Share (3)	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
July 1, 2024 to July 31, 2024	213,783	$356.98	213,783	$533,614,744
August 1, 2024 to August 31, 2024	237,178	$357.80	237,178	$447,947,258
September 1, 2024 to September 30, 2024	265,151	$359.11	265,151	$351,825,754
Total	716,112	$358.04	716,112

(1)In September 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to begin repurchasing shares of our outstanding common stock. Subsequently, the Board has from time to time increased the amount authorized for repurchases under such program. In June 2024, our Board increased such amount by $500 million. Since the inception of the repurchase program, the Board has authorized us to repurchase up to $2.65 billion of our outstanding common stock. As of September 30, 2024, there remained authorization for us to repurchase approximately $351.8 million of our shares. No shares have been repurchased by us since the program was announced other than pursuant to such program. The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of common stock, and may be suspended, recommenced, or discontinued at any time or from time to time without prior notice. Refer to Note 10 - Common Stock of the notes to consolidated financial statements for further information regarding our share repurchase program.

(2)Excludes 886 shares surrendered to the Company by participants in our share-based compensation plans to satisfy minimum tax withholdings for common stock issued under such plans.

(3)Price paid per share excludes any applicable broker commission or excise tax due. However, as such amounts are considered direct costs associated with the repurchase of our common stock, they have been reflected as a reduction in the remaining authorization under our share repurchase program.

ITEM 4. MINE SAFETY DISCLOSURES.

Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this quarterly report.

ITEM 5. OTHER INFORMATION.

During the quarter ended September 30, 2024, none of the Company’s directors or executive officers adopted or terminated any: (a) contract, instruction, or written plan for the purchase or sale of Company securities intended to satisfy the affirmative defense conditions of Rule 10b5-1 or (b) non 10b5-1 trading arrangement, each as defined in Item 408(a) of Regulation S-K.

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ITEM 6. EXHIBITS.

EXHIBIT INDEX

Exhibit
No.

Description

Incorporated By Reference to or
Filed Herewith, as Indicated Below

3(a-1)

Restated Certificate of Incorporation of EMCOR filed December 15, 1994

Exhibit 3(a-5) to EMCOR’s Registration Statement on Form 10 as originally filed March 17, 1995 (“Form 10”)

3(a-2)

Amendment dated November 28, 1995 to the Restated Certificate of Incorporation of EMCOR

Exhibit 3(a-2) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 1995 (“1995 Form 10-K”)

3(a-3)

Amendment dated February 12, 1998 to the Restated Certificate of Incorporation of EMCOR

Exhibit 3(a-3) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 1997 (“1997 Form 10-K”)

3(a-4)

Amendment dated January 27, 2006 to the Restated Certificate of Incorporation of EMCOR

Exhibit 3(a-4) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 2005 (“2005 Form 10-K”)

3(a-5)

Amendment dated September 18, 2007 to the Restated Certificate of Incorporation of EMCOR

Exhibit A to EMCOR’s Proxy Statement dated August 17, 2007 for Special Meeting of Stockholders held September 18, 2007

3(a-6)

Certificate of Amendment of Restated Certificate of Incorporation of EMCOR

Exhibit 3.1 to EMCOR’s Report on Form 8-K (Date of Report June 8, 2023)

3(b)

Second Amended and Restated By-Laws of EMCOR

Exhibit 3.1 to EMCOR’s Report on Form 8-K (Date of Report October 25, 2022)

31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Anthony J. Guzzi, the Chairman, President, and Chief Executive Officer

Filed herewith

31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Jason R. Nalbandian, the Senior Vice President, Chief Financial Officer and Chief Accounting Officer

Filed herewith

32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chairman, President, and Chief Executive Officer

Furnished

32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Senior Vice President, Chief Financial Officer and Chief Accounting Officer

Furnished

95.1

Information concerning mine safety violations or other regulatory matters

Filed herewith

101

The following materials from EMCOR Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Equity and (vi) the Notes to Consolidated Financial Statements.

Filed

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

Filed

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: October 31, 2024


			EMCOR GROUP, INC.
			(Registrant)

BY:			/s/ ANTHONY J. GUZZI
			Anthony J. Guzzi
			Chairman, President, and Chief Executive Officer (Principal Executive Officer)

BY:			/s/ JASON R. NALBANDIAN
			Jason R. Nalbandian
			Senior Vice President, Chief Financial Officer and Chief Accounting Officer (Principal Financial and Accounting Officer)

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Date	Price Target	Rating	Analyst
11/15/2024	$600.00	Buy	Stifel
1/10/2024		Sector Weight	KeyBanc Capital Markets
1/17/2023		Overweight → Sector Weight	KeyBanc Capital Markets
5/16/2022	$137.00	Neutral → Buy	Sidoti
2/25/2022		Neutral → Buy	DA Davidson
11/8/2021	$132.00 → $141.00	Buy	Stifel
7/30/2021	$115.00 → $125.00	Neutral	DA Davidson
6/24/2021	$146.00	Sector Weight → Overweight	Keybanc

SEC Form 10-Q filed by EMCOR Group Inc.

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