NYSE:EME EMCOR Group Q1 2023 Earnings Report $16.44 +0.23 (+1.42%) Closing price 04/23/2025 04:00 PM EasternExtended Trading$16.43 -0.01 (-0.03%) As of 04/23/2025 04:45 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Fulton Financial EPS ResultsActual EPS$2.32Consensus EPS $1.83Beat/MissBeat by +$0.49One Year Ago EPS$1.39Fulton Financial Revenue ResultsActual Revenue$2.89 billionExpected Revenue$2.87 billionBeat/MissBeat by +$23.25 millionYoY Revenue Growth+11.50%Fulton Financial Announcement DetailsQuarterQ1 2023Date4/27/2023TimeBefore Market OpensConference Call DateThursday, April 27, 2023Conference Call Time10:30AM ETUpcoming EarningsEMCOR Group's Q1 2025 earnings is scheduled for Wednesday, April 30, 2025, with a conference call scheduled at 10:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by EMCOR Group Q1 2023 Earnings Call TranscriptProvided by QuartrApril 27, 2023 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Good morning. My name is Keith, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:27I I now would like to turn the conference over to your host today, Mr. Blake Mueller with FTI Consulting. Please begin. Speaker 100:00:33Thank you, Keith, and good morning, everyone. Welcome to the EMCOR Group conference call. We are here today to discuss the company's 2023 Q1 results, which were reported this morning. I would like to turn the call over to Kevin Matz, Executive Vice President of Shared Services, who will introduce management. Kevin, please go ahead. Speaker 200:00:51Thank you, Blake, And good morning, everyone. And as always, thank you for your interest in EMCOR and welcome to our earnings call for the Q1 Call. For those of you who have accessed the call via the Internet and our website, welcome to you as well. And we hope you have arrived at the beginning of our slide presentation that will accompany our remarks today. We are on Slide 2. Speaker 200:01:15This presentation and discussion contains certain forward looking statements and may contain certain non GAAP financial information. Page Stutes describes in detail the forward looking statements and the non GAAP financial information disclosures. I encourage everyone to review both Call. In conjunction with our discussion and accompanying slides. On Slide 3, the executives who are with me to discuss the quarter's results are Tony Guzzi, our Chairman, President and Chief Executive Officer Mark Pompa, Executive Vice President and Chief Financial Officer and our Executive Vice President and General Counsel, Maxine Mauricio. Speaker 200:01:50For call participants not accessing the conference call via the Internet, this presentation, including the slides, will be archived in the Investor Relations Call of our website under Presentation. You can find us at emcorgroup.com. And with that being said, please let me turn the call over to Tony. Tony? Speaker 300:02:07Yes. Thanks, Kevin, and good morning, and thank you for joining our call. I will cover Pages 4 through 6 in my opening comments. The momentum of the past few quarters continued in our business as we had an exceptional Q1 2023. Our team is executing well, and I appreciate the team's focus and dedication towards driving excellent outcomes for our customers. Speaker 300:02:28We earned diluted earnings per share of $2.32 on revenues of $2,89,000,000 We also grew remaining performance obligations or RPOs from the year ago period and from December 31, 2022 to a record $7,870,000,000 During the Q1 of 2023, we executed very well across all segments. And the broad themes that drove our business in 2022 continued, including the underlying strength in the retrofit markets with a focus on energy efficiency and IAQ or indoor air quality, which also leads to emissions reduction. Growth in the network communications and data center markets, strong demand in healthcare and high-tech manufacturing, including semiconductors And all things around the EV or electric vehicle value chain and traditional manufacturing and industrial projects driven by the onshoring supply And domestic capacity expansion. We also continue to see an increase in demand for our downstream refinery and petrochemical services. I will discuss these trends in more detail in my later commentary. Speaker 300:03:50Further, we are executing well on a good mix of business as evidenced by our improved gross profit margin execution to mitigate such headwinds, which we expect to continue through the balance of 2023. As our results demonstrate, we had a great start to the year in our Construction segments. This was due to the expertise and skill of our subsidiary and segment teams in estimating, winning, planning And executing complex projects across diverse market sectors, trades and geographies. Our Mechanical Construction segment continues to perform in an exceptional manner With an operating income margin of 8% and organic revenue growth of 8.7%. Driving this growth is strong penetration in high-tech manufacturing, Especially in the areas of semiconductors and the EV value chain as well as continued demand for data centers. Speaker 300:04:49We are winning in the traditional piping trades, but also in ever expanding fire and life safety trades. Our strong operating income margin is a result of exceptional job Call by planning and execution, supported by excellence in BIM and prefabrication. Our Electrical Construction segment's performance continued to strengthen To historical levels, we earned an operating income margin of 6.3% in the quarter, representing a 250 Base point improvement versus a year ago period, and we had organic revenue growth of 16.8%. We had robust performance across important sectors such as network and communications, which encompasses our data center work, Healthcare and Manufacturing and Industrial. We expect our results to continue to strengthen in the segment with improved project planning and execution, and have opened new markets and opportunities for us. Speaker 300:05:53Our U. S. Building Services segment had a strong Q1. We had operating margin of 5.2 We successfully executed project work and through improved planning, trade and job site coordination and estimating, managed to address some of the supply chain challenges that negatively impacted such work last year. We often talk about the work we do to Our customers' energy efficiency and indoor improve air quality, which then results in emissions reductions and supports our customers' sustainability goals. Speaker 300:06:34Our building services companies work through a diverse set of channels to deliver these projects and services to commercial, institutional, health care and manufacturing We serve these customers directly, but also through major real estate providers, utilities and ESCOs or energy service companies. We see our ability to serve our customers through such diverse channels as a competitive advantage, and we'll continue to seek out the broadest set of customers possible. The results of our Industrial Services segment continue to improve at a steady space, earning an operating margin of 4.5% in the Q1 call. We executed a more normal turnaround season and saw improved demand and mix for our shop services. We continue to execute work supporting our customers' increased demand for energy and operating efficiency as well as the renewable fuel expansion. Speaker 300:07:30The segment's performance trajectory continues to improve, and we would be even more positive about this segment's outlook If solar panel supply chain issues were not delaying our execution of electrical work Supporting the solar fields. Our U. K. Team continues to execute well despite a challenging market and foreign exchange headwinds. We continue to grow our customer base and are happy with our mix of facilities management contracts and owner direct project work. Speaker 300:08:01We leave the quarter with an excellent mix of work and our record RPOs of $7,870,000,000 We have a strong balance sheet to support our organic growth outlook and our capital allocation model. And with that, I will turn the presentation Over to Mark. Speaker 400:08:21Thank you, Tony, and good morning to everyone participating on the call today. For those accessing this presentation via the webcast, we are now on Slide Call. Over the next several slides, I will augment Tony's opening commentary and review each of our reportable segments' 1st quarter operating performance as well as other key financial data derived from our consolidated financial statements included in both our earnings release announcement and Form 10 Q filed with with the Securities and Exchange Commission earlier this morning. So let's expand our review of EMCOR's Q1 performance. Consolidated revenues of $2,89,000,000 are up $297,900,000 or 11.5 percent over quarter 1 2022. Speaker 400:09:02Our Q1 results include $35,200,000 of revenues attributable to businesses acquired pertaining to the period of time that such businesses were not owned by EMCOR in last year's Q1. Excluding the impact of acquisitions, 1st quarter consolidated revenues increased approximately $262,700,000 I would like to highlight that our consolidated revenues of $2,89,000,000 established a new first quarter record and represents our 2nd best ever quarter. With that being said, I will now cover the results of each of our reportable segments starting with revenue. United States Electrical Construction segment Quarter 1 revenues of $644,700,000 increased $122,700,000 or 23.5 percent from 20 22's comparable quarter. Excluding incremental acquisition contribution, this segment's revenues grew a strong 16.8% organically quarter over quarter. Speaker 400:10:03Increased project activity within the Network and Communications, Healthcare, Manufacturing and Hospitality and Entertainment market sectors More than offset revenue declines in transportation and traditional commercial market sector activity. We continue to experience strong demand from our data center customers As evidenced by the growth and remaining performance obligations within the network and communications market sector, and we are executing against these contracts. Revenues of our United States Mechanical Construction segment of $1,100,000,000 increased approximately $86,000,000 or 8.7 percent from the year ago period. Revenue growth during the quarter was predominantly derived from the high-tech and network and communications market sectors. Increased activity And within the quarter included both mechanical construction as well as fire protection services for customer projects supporting the design and manufacture of semiconductors, Electric vehicles and or related battery technologies. Speaker 400:10:59Additionally, similar to our Electrical Construction segment, Our mechanical construction businesses are experiencing strong demand resulting from the growth in data center development. Both our electrical and mechanical Construction segments established new 1st quarter revenue records in 2023 and consequently our total U. S. Construction revenues of 1 point $72,000,000,000 represent a 1st quarter record as well. This performance surpassed that of the prior year period by $208,600,000 Call or 13.8%. Speaker 400:11:31United States Building Services segment revenues of $725,400,000 increased $89,800,000 or 14.1 percent, representing an all time quarterly record for this segment. Growth was primarily experienced within the segment's Mechanical Services division, which generated incremental revenues from each of its service lines. Notably, we saw an increase in HVAC project and retrofit work due to slightly improved equipment availability that Additionally, this segment continues to experience strong demand for building automation and control solutions as our customers print. We believe that this will be an area of continuing demand for us. Our United States Industrial Services segment generated revenues of $330,900,000 An increase of $20,100,000 or 6.5 percent year over year. Speaker 400:12:37Despite the ongoing volatility in the broader oil and gas industry, We continue to see a steady resumption in demand for our field services offerings, and as a result, we achieved a solid start to 2023. Additionally, we have experienced an increase in newbuild heat exchanger orders and pull through cleaning and maintenance within this segment's shop services operations. United Kingdom Building Services segment revenues of $110,900,000 represent a reduction of $20,600,000 from last year's Q1. Unfavorable exchange rate movements due to the weakening of the pound sterling negatively impacted this segment's quarter 1 2023 revenues by to $10,800,000 Excluding the impact of foreign exchange, EMCOR's U. K. Speaker 400:13:21Revenues decreased due to the loss of Certain facilities maintenance contracts not renewed pursuant to rebuild as well as a reduction in project activity within with certain customers period over period. Please turn to Slide 8. Selling, general and administrative expenses of $281,200,000 represent 9.7 percent of 1st quarter revenues and compared to $252,600,000 9.7 percent of revenues in the year ago period. SG and A for the current year's quarter includes approximately 5 increase in SG and A of $23,300,000 With EMCOR's continued revenue growth, we have added personnel to support our back office and contract administration functions, resulting in increases in salaries and benefits from the corresponding 2022 period. Additionally, with the increase in both our quarter 1 operating income and diluted earnings per share, as well as the positive revision in our full year 2023 EPS outlook, Call, which Tony will cover later in this morning's presentation, we have seen a resulting increase in incentive compensation expense to reflect the actual and anticipated improvement in year over year performance. Speaker 400:14:40Reported operating income for the quarter was $154,900,000 5.4 percent of revenues, it favorably compares to approximately $100,000,000 of operating income or 3.9 percent of revenues a year ago. Consistent with my revenue commentary, the current quarter's operating income and operating margin performance each represent new quarter one records for the company. Specific quarterly operating income performance by segment is as follows. Our U. S. Speaker 400:15:09Electrical Construction The segment earned operating income of $40,500,000 an increase of $20,500,000 from the comparable 2022 period. Reported operating margin of 6.3 percent is significantly improved from last year's quarter given a more favorable revenue mix as well as reductions in labor productivity and efficiency. Although we are still experiencing various degrees of supply chain difficulties, The level of impact in the current year has been less severe than that experienced in the early part of 2022. This is due to both improved equipment availability and our subsidiary management team's ability to adapt to this less than optimal operating environment. 1st quarter operating income of our U. Speaker 400:15:59S. Mechanical Construction segment of $86,200,000 represents a $27,800,000 increase from last year's quarter An operating margin of 8% represents a substantial increase from the 5.9% earned a year ago. In addition to this segment's exceptional project for the primary factors driving this quarter over quarter improvement. Operating income for U. S. Speaker 400:16:31Building Services is 37,700,000 call, or 5.2 percent of revenues and compares to $24,200,000 or 3.8 percent of revenues in 20 22's Q1. Consistent with the segment's revenue performance, these improvements were driven by their Mechanical Services division, which saw increases in both gross Call. Profit and gross margin due to better project execution as well as the favorable impact of negotiated price adjustments, which have been enacted in response to the inflationary pressures we've experienced. Compared to the year ago period, our U. S. Speaker 400:17:04Industrial Services segment Operating income of $15,000,000 or 4.5 percent of revenues represents an increase of $1,800,000 with a slight expansion in operating margin, Better pricing and mix, coupled with more normalized demand are the primary reasons for these quarter over quarter improvements. UK Building Services operating income of $5,400,000 represents a decrease of $5,200,000 while operating margin of 4.9% was reduced from 8.1 percent of margin a year ago. Exasperating the impact of reduced quarterly revenues on operating income, this segment experienced a shift in the mix in call. The size of project work, which resulted in a decrease in gross profit margin. Additionally, contributing to the unfavorable period over period comparison Call is the impact in 20 22's Q1 of a successful project closeout, which enhanced reported operating margin in the prior year period. Speaker 400:17:59This segment's operating income was also negatively impacted in the quarter by $500,000 resulting from unfavorable exchange rate movements. We are now on Slide 9. Additional financial items of significance for the quarter not addressed on the previous slides are as follows. Gross profit of $436,100,000 is higher than the comparable prior year period by $83,500,000 or 23.7 percent And gross margin of 15.1 percent is up 150 basis points quarter over quarter. Diluted earnings per common share is $2.32 As compared to $1.39 in 20 22's Q1, the increase in quarterly net income combined with the reduction in our weighted average shares outstanding has led to a $0.93 EPS improvement year over year. Speaker 400:18:50Our share repurchases in 2022 have positively impacted Our Q1 2023 diluted earnings per share by $0.25 Please turn to Slide 10. EMCOR's balance sheet maintains its strength and liquidity, positioning us to fund organic growth, pursue strategic M and A opportunities and return capital to shareholders. Fluctuation of note within our balance sheet when compared to December of 2022 are as follows. Cash on hand of just over $420,000,000 has decreased by $36,400,000 During the quarter, we utilized $84,600,000 of cash to fund our operations, Deployed $25,400,000 for investing activities, including capital expenditures and acquisitions and returned $23,200,000 to stockholders through share repurchases and dividends. These uses of cash were partially offset by borrowings during the period of $100,000,000 under our revolving credit facility, Resulting primarily from our organic growth during the period, our working capital balance has increased by nearly 190 $3,000,000 The slight increase in goodwill was entirely a result of the 2 asset acquisitions completed by us during Call. Speaker 400:20:03Quarter 1 of 2023, while identifiable intangible assets have decreased marginally as the assets recognized in connection with these acquisitions We're more than offset by amortization expense during the period. Total debt has increased by just under $100,000,000 As a result of the additional borrowings under our revolving credit facility previously referenced, this increase in debt is the primary reason for the change in our debt to capitalization ratio call reflected on the bottom of Slide 10. And lastly, our stockholders' equity balance has increased by just over $92,000,000 Call. As our net income for the period exceeded our share repurchases and dividend payments. With my portion of this morning's slide presentation completed, I will now return the call back to Tony. Speaker 300:20:47Yes. Thanks, Mark. And I'm going to be on Page 11, remaining performance obligations by segment and market. The robust demand for our services continued the trend we experienced in the final three quarters of 2022 into the Q1 of 2023. Total company remaining performance obligations or RPOs at the end of the first quarter We're almost $7,900,000,000 up a little over $1,900,000,000 or 32% over the March 2022 total of $5,950,000,000 All but approximately 169,000,000 Of the $1,900,000,000 increase was organic. Speaker 300:21:31Additionally, 1st quarter project bookings were also strong With RPOs increasing $414,000,000 or 5.5 percent in the 1st 3 months of 2023 from year end call. Strong underlying demand in our most resilient sectors. RPO growth was broad based with each of our domestic reporting segments Experiencing double digit RPO growth in the Q1 versus the Q1 in the year ago period. Further, each of these four business segments saw RPOs increase in the Q1 from year end 2022. Our 2 domestic construction segments experienced strong project growth year over year with group. Speaker 300:22:26Combined RPOs increasing just under $1,700,000,000 or 36% from March 2022. The U. S. Mechanical Construction segment saw RPOs increased by $934,000,000 or 28%, While the U. S. Speaker 300:22:44Electrical Construction segment saw an increase of $754,000,000 or 58%, Much of the construction segment's RPO increased results from continued demand for hyperscale data centers, Call, which includes the production and development of electric vehicles, battery plants and other manufacturing and industrial facilities driven to support this important new industry. We also are seeing increased demand from the on shoring of manufacturing and industrial Facilities as well as the expansion of capacities by some of our customers. Also across this whole EVV value chain and Call. Across this reshoring and capacity expansion, we're seeing strong demand for our fire and life safety services. Our U. Speaker 300:23:45S. Building Services RPO levels increased $237,000,000 or 23% from March 2022 And now stands at $1,250,000,000 and a lot of that is a small to midsized project and service work. Like all of 2022, this quarter saw continued project awards in its Mechanical Services division, which is focused a lot on call. Energy efficiency, indoor air quality and general retrofit projects as well as repair service work with growth in all the channels we serve to deliver these projects. U. Speaker 300:24:22S. Industrial Services grew RPO slightly year over year due to an increase in demand for our heat exchanger soft services and products. Moving to the right side of the page, we show RPOs broken down by market sector. As you can see, we have expanded sector segmentation to 10 market sectors. As we stated in our February call And for greater transparency into our current and future work, we split out what was previously reported as commercial RPOs into 3 sectors. Speaker 300:24:54The first of which is at the bottom is the traditional commercial projects, and that's the golden bar. And it includes work in office buildings, warehouse, Call. Retail and Restaurants and Other Commercial Buildings. Commercial Sector RPOs have increased $198,000,000 We're a little over 12% on a year over year basis. We disaggregated these commercial sectors into other ones to include network and communication, And that is the Maroon Bar. Speaker 300:25:24And that includes work that we've previously referred to as our telecommunications projects, which are data centers, data and fiber projects and network cabling projects. This sector has grown RPOs $516,000,000 or 86% year over year. We now have a group called High-tech Projects, And it's in the high-tech manufacturing sector, as shown by the green bar. And these projects and services are in the semiconductor, biotech, Life Sciences, Pharmaceutical and the EV value chain. Year over year, high-tech RPOs have increased $481,000,000 or over 100%. Speaker 300:26:06We believe that these industries in this high-tech sector, high-tech manufacturing sectors Arren, for the most part, in the initial stages of capacity expansion and development, and that's where we continue to expect to see growth. And It will be up and down a little bit as these are large projects a lot of times coming in and that will drive growth in our RPOs. We also believe that to date, there has been negligible impact of the government legislation that was designed to support these sectors. It just was passed, and we think that legislation will not only increase further demand, but we think it will elongate the duration of that demand. As I've said before, we continue to broaden our fire and life safety services across all these sectors. Speaker 300:26:53That would be the gold, The maroon and the green, and we continue to provide projects across all sectors. Looking at other market sectors and year over year activity, Healthcare RPOs are up 55%, institutional is up 10% and manufacturing and industrial up 35% And short duration projects, which include much of the HVAC and repair service work, it's flat, maybe up 1%. And partially offsetting this increase was a reduction in transportation and water and wastewater RPOs. And looking at our market sector Participation, it is noteworthy to see how balanced our participation is. This balance demonstrates One of the strengths we have highlighted before, which is our ability to provide electrical and mechanical construction, retrofit and repair service technical labor and solutions across diverse nonresidential market sectors and U. Speaker 300:27:50S. And U. K. Geographies. We have decent work in hand and continue to bid new project opportunities across many nonresidential market sectors. Speaker 300:28:00Our project mix is good, and we are executing well in all phases of project delivery in what is still a very Challenging operating environment. I have mentioned several of these robust sectors before today that drive our growth. On the next page, on Page 12, you'll see highlights in more depth that explain them to you. I am not going to cover that page in detail today because I think It would be redundant with the commentary I just made explaining our RPOs. And with the enhanced disclosure around commercial, I think we've met many of the things we talk about on Page 12. Speaker 300:28:34And with that, I will now turn to Page 13 and 14. We expect our success to continue in 2023 despite a market that has uncertainty in it. We are going to leave our revenue guidance call. At $12,000,000,000 to $12,500,000,000 in revenues. But we are going to increase our earnings per diluted share guidance From what was a range of $8.75 to $9.50 to $9.25 to $10 And earnings per diluted share is what we now expect our guidance to be. Speaker 300:29:10Our RPOs remain strong, and we continue to see demand in key areas like we talked call. Commercial retrofit, semiconductors, health care, data centers, bio life sciences. We also are seeing strong demand, as I said before, for our fire life safety services across most major end markets. The supply chain issues and challenges that we experienced through the last 18 months still exists with long lead times, unreliable delivery schedules for finished systems like switchgear and HVAC equipment. We also expect to continue to see inflationary pressures for labors, materials and fuel. Speaker 300:29:45However, as we did in most of 2022 And in the Q1 of 2023, we will continue to adapt to better planning, estimating and resource allocation. So where do we end up in this guidance range will depend on several factors, some in our control and some outside of our control. And I'm going to cover first the ones that we believe that are more in our control, and it's not an exhaustive list, but it is the major ones. The first thing we need to do is we need to continue to increase our use of BIM or building information modeling, prefabrication and enhanced planning to drive efficiency, improve safety and increase the quality and productivity of our service delivery. We need to continue to pay attention and enhance our pricing and estimating to mitigate the impact of inflation and supply chain challenges. Speaker 300:30:343rd, we need to leverage our reputation as an employer of choice to staff our jobs with the right mix of skills and classifications To not only enhance our labor productivity but also our safety and cost. 4th, we need to train and educate our employees at all levels of the organization to To work smarter and lead better. 5th, we need to be vigilant with our commercial service customers and actively monitor their financial condition and payment status with us Yes, they remain challenged with occupancy and now refinancing issues. And finally, we always look to gain SG and A leverage. However, we always will have areas beyond our control that could affect our performance. Speaker 300:31:13Number 1, material sourcing and lead times continue to challenge the market and our customers. I don't think that's improving in 2023, not much anyway. Number 2, higher interest rates and economic uncertainty may impact the demand for some of our customers' products and Services, and then it will impact us. I expect this move this will move some projects in the planning stage to later periods, And those in the decision stage may be postponed, rephased or rescoped. Number 3, Disruption caused by uncertain energy markets and supply, especially as the conflict in Ukraine continues and it could potentially intensify. Speaker 300:31:51OPEC took supply out of the market and China's reopening increases demand. However, we expect to continue to generate strong operating cash flow, And we'll continue to execute our long term and successful capital allocation strategy. The balance is supporting our organic growth and acquisition While returning cash to shareholders through dividends and share repurchases. Finally, as always, I would like to continue to thank the EMCOR team None of this would be possible without your discipline, teamwork and dedication to drive the best possible results for our customers. And as a result of serving our customers so well, we continue to produce outstanding results for our shareholders. Speaker 300:32:33And with that, Keith, I will take questions. Operator00:32:36Thank you. At this time, we will begin the question and answer session. And today's first question comes from Matt Thillman with D. A. Davidson. Speaker 500:32:59Hey, thanks. Good morning. Congrats on Speaker 300:33:01a great quarter. Speaker 500:33:01Good morning, Matt. Speaker 300:33:02Thank you. Speaker 500:33:04Tony, I was just wondering if you could comment on your traditional commercial vertical just in the context of these Kind of heightened concerns around credit tightening. It seems like that'd be an area you may have the most exposure or risk, but I'd love to hear Sort of how you'd pick that apart? Are there high levels of retrofit and upgrades within that vertical versus new construction? Any anecdotes there would be Really helpful. Speaker 300:33:31I mean so that's why we did the enhanced disclosure. Then you can see the yellow bars traditional commercial. And it's the part that's up leased year over year, and it's essentially flat from year end. Now part of that is a result of we're starting to burn through That's where you really saw the impact of elongated supply lines because those projects that we do for the most part are meant to be quicker hitting. So So if you think about EMCOR's commercial backlog, probably less than 1% of what we do today to 1.5% is what I would call new out of the ground commercial or high rise residential. Speaker 300:34:11At one time, that was very different. The bulk of the business that's in that Traditional yellow section or even that pink section up top, and that pink section has you could take that pink section and spread it across all our other sectors there, The short duration projects, but that yellow for the most part is aftermarket. It's short duration projects, not short duration, it's major retrofit, It's retrofit. It's tenant build out. It's ad moves and changes. Speaker 300:34:40It's where our longer duration energy retrofit projects are. It's that kind of stuff. It's the vast preponderance of what we do in commercial now. And then as you move up, right, we talked about the maroon and the green. I mean, the reality is that's a good breakout, right, because that's where the growth is coming for us. Speaker 300:34:59And like we said, that growth was coming even before the enhanced legislation. I'd like the Chips Act and IRA. We expect that to even continue more. And I talked about it maybe growth or elongation. But we're careful in that commercial call. Speaker 300:35:13Sure. We've been careful in that commercial sector for a long time. We're especially careful when it's developer led. We pay attention to a lot of collections, and we pay attention to their financing. Do I think new Grille commercial is a growth market Right now, no. Speaker 300:35:32Do I think there's opportunities with well capitalized customers? The answer is yes. Well, I think the energy efficiency market has legs for a while to go. And I like the way we service that energy efficiency market and the short duration project market. We service that through a lot of different channels. Speaker 300:35:50We go direct to the owner. We go to the owners, what would be called their in house general contractor or Construction manager that may run all their projects like in a university or a manufacturing setting, but we're the contractor of choice and have been there for a while. We go through the large real estate providers and facilities managers. We go through that channel. We go through utilities that have programs where they direct where they helps fund and direct and they have the salespeople that work with us and sell the project. Speaker 300:36:20And then we go through the major ESCOs where they may sell project and now they actually have people actually have to go figure out how to get it done. And we have the sales force that knows how to sell to them and sell to every one of those channels. And so we like that position. We think that market has legs. So it's a complex answer, But that's why we did the enhanced disclosure because we were starting to make it harder for us to have people understand Where the real growth and with that commercial sector the way we traditionally defined it was. Speaker 500:36:52Okay. I appreciate that. Just I guess staying on the topic of the RPOs, Tony, the healthcare Piece also really sticks out to me, just the continued expansion there. I guess my question is, would you consider that A fairly diverse group of customers and a broader trend or is this aligned with some specific customers that just happened to be spending? Speaker 300:37:16It's both. It's both, Brent. It's both, right? On one sense, specific customers drive that backlog because they can be large projects. But if you look over 2 or 3 year period over time and the way we think about it, it's part of a broader trend. Speaker 300:37:32They got, Speaker 600:37:35Conference Call. Quite frankly, disrupted a little bit Speaker 300:37:36with COVID because they weren't building new facilities in the middle of COVID. They were building emergency facilities but not new facilities or retrofitting so you New multiuse. So some of this is pent up demand on what should have been capital planning, but it's a long term trend. Hospitals and big health care facilities and outpatient Facilities. They need to be cleaner. Speaker 300:37:55They need to have better ventilation. They need to have the ability to flex from positive pressure to negative pressure in our world. They have much more complex low voltage needs. They have much more complex general electrical needs. They have to put backup power. Speaker 300:38:09And while they're doing all that, they have to think about their Sustainability goals and how they're going to operate that facility more efficiently. Speaker 500:38:19Okay. Yes. Thanks, Tony. And the last one, just, I guess, which of the 2 construction business groups Are you seeing still sort of more profound challenges related to the supply disruptions, inflation? Is it more electrical or mechanical? Speaker 500:38:36Because It looks like the electrical margin definitely snapped back big from last year, but maybe a little below what levels we've seen in the past. I'd just Love to kind of understand that. I think Speaker 300:38:49I would say probably electrical more than mechanical. It's a more consolidated market for major end products, and it's more on the critical path. So we've had to rejigger our means and methods We'll work around that. Mechanically, we buy a lot of equipment. We do a lot of HVAC work. Speaker 300:39:10We also do a lot of just straight piping work, supporting big process plants or where the owner bought the equipment. And so they They do that in the electrical business, too, for major gear. But my experience has been when you look at things like generators and switch gears And Smart Panels, the delivery performance is not great yet. The mechanicals got a little better. At least what they say they're going to do, they do. Speaker 300:39:35But the electrical lead times haven't really moved much down at all. The mechanicals have started to move down a little bit. And I think, in general, the mechanical sales forces are Speaker 400:39:43more in tune with their factories. Speaker 300:39:43And I call. Sales forces are more in tune with their factories, and I think they have better visibility to keep us up to date on what's happening Then the electrical sales force. Speaker 500:39:57Okay, really helpful. Speaker 300:39:58That's what I meant. Speaker 500:40:00Call. Yes. Okay. Thanks guys. Yes. Operator00:40:06Thank you. And the next question comes from Matt Talhaimehr with Thompson Davis. Speaker 700:40:12Hey, good morning guys. Great quarter. Speaker 300:40:13Thanks, Adam. Speaker 700:40:16On the industrial Business that was your best quarterly op income in 3 years. Just curious what your visibility call. Is like there and what the if you can build on the Q1 result. Speaker 300:40:30Look, we think things have gotten better. We like where our shop backlog is at. We like what that portends for the future. We think we're in a more normalized operating environment, which is good. We expect to continue to operate normally. Speaker 300:40:45We have no reason to believe we don't have a normal fall turnaround season coming up. I think the long pole in the tent is a new product we have, right, or a new service, which is building these alternative energy, the renewables, Especially around solar, and that's clogged up everywhere. But Mark, I mean Speaker 600:41:02Yes, Adam, the only thing I would Speaker 400:41:03add is just don't lose sight of the fact Call. So it's kind of bookends quarter 1 and quarter 4. But having said that, we saw, as Tony mentioned a couple of During his pre prepared remarks, we saw as close to a normal operating environment as we've seen in a while with that customer base. And it's a lot of it is mix driven as well. So we're deploying the qualified label we have. Speaker 400:41:31And if our customers adhere to their to the schedules that we've been planning with them, we're optimistic that 2023 is going to at least look like A normal 12 month performance period for the Industrial Services segment. Speaker 300:41:45And that's reflected in our guidance. And part of that's reflected in our guidance, Jacob. Speaker 700:41:51Okay. What is the outlook for solar panels? I don't know that I follow it that close. Speaker 300:41:58There are certainly people way better qualified to talk about that than us as part of our business. But based on what we see, not good. It's still clogged up. I don't think there's going to be this big uptick this year. But again, that's sort of There's people that know a lot more about that than me. Speaker 300:42:19As someone that follows it closely through our bidding at work, we see a lot of delayed work. Speaker 700:42:25Call. And then, I guess, Brent kind of touched on this, but I just wanted to touch on your macro comment. And there's I guess the debate is, Where do you think macro would manifest itself? Because it seems like a lot of these big projects are kind of locked and loaded and there's government support. So maybe those big projects go, but there's risk to the short duration projects? Speaker 500:42:48Yes. I think there's Speaker 300:42:53It's hard to tell. I mean, the short duration projects have something that's been driving them for a while. And so there's this counterbalancing view out there, right, in my mind because of energy pricing and people's drive for more sustainable facilities. So on one hand, you sit there and say, well, I just won't do the project. On the other hand, you say, every day I don't do that project, my cost structure becomes worse Because energy prices continue to become uncertain and escalate. Speaker 300:43:21And most of our major customers have committed to sustainability goals. And you can't get there unless you do equipment replacement and modernization and all the something as simple as fixing Compressor lines in a manufacturing facility, that requires a lot of work. It requires new equipment. If you take out something that used to be 0 point 68 kw per tonne and now you're putting in something with 0.32 kw per tonne on a chiller and it has variable speed. That's a market change in your operating cost profile. Speaker 300:43:54And then you're going to start thinking about, okay, I have to do that. If I don't do that in these triple Leases, which has always been the bane to the existence of energy efficiency, my building may no longer be competitive, right? So I have all these forces going on around me. And so I think that if you're heavily exposed to new build commercial, you probably have a different outlook than we have on that. I also think if you think of some of these major projects that are going on, on those big things I've talked about from reshoring, EV value chain, Semiconductors, data centers. Speaker 300:44:28And remember, there's a whole ecosystem around each of those. I guess most of this was happening without government support. That can only help it now, and it can only elongate it in my mind. And most of these customers are not worried about 500 basis point expansion in interest rate costs. 1, they're self funded for the most part and the kind of value they're going to create over what they're doing. Speaker 300:44:53And then you layer on top of that for some of these industries the demands with respect to national security and the onshoring of some critical industries, I think that mix drives long term demand in a favorable way. And look, for us, we have great RPOs. We expect to continue to have great RPOs. From this high level, that could plus or minus a little bit quarter to quarter, but we expect our overall trends over the next couple of years to be pretty good As on in these major sectors. But we'll see. Speaker 700:45:24Right. Okay. Good color. Thanks, guys. Operator00:45:28Thank you. And the next question comes from Sean Eastman with KeyBanc. Speaker 600:45:33Hi, team. Great start here. Very good start. I thought the big takeaway from the Q1 was really the margins. I mean, I think this is a record Margin performance for our Q1, yet you guys are saying there's still kind of lingering supply chain challenges. Speaker 600:45:54Is there something unsustainable that came through in the Q1? Or are we just Kind of effectively not updating the outlook, sort of just flowing through a better start to the year. Speaker 300:46:09I don't know, Sean. I think taking our outlook up to $9.25 to $10 from $8.75 to $9.50 is a pretty big move. I think the revenue velocity is in the business, and we said that in our initial guidance. And I think further, if you extrapolate that, I think that what we're really saying in the guidance is we expect strong margins through the year. Now we are mix dependent. Speaker 300:46:37And projects start, they finish. But we there was nothing extraordinary in Group. 1st quarter, right, Mark? Speaker 400:46:44Yes. Sean, the only thing I'd point out, if you recollect from quarter 1 last year, We did have some additional headwinds with regards to project write downs both in electrical and mechanical construction. The extent of write down activity in the Q1 of 2023 was not at that same level. The other thing which is extremely difficult to call. Confirm relative to 2023's quarter 1 is with the fairly mild winter weather pattern we had in In most of the geographies we operate, we didn't deal with the same level of job site difficulties with regards to fighting weather. Speaker 400:47:23But Like I said, that's difficult to quantify. It does not have an outsized impact on the quarter performance. And the only thing it might have done is pulled some activity Forward in the year. Speaker 300:47:33And I think the other thing that bolstered 1st quarter operating margins, operating income margins is this is a seasonally strong Quarter for Industrial. And so we have to factor in what second and third quarter mean to us there, especially if we can't deliver some of the solar work that we hope to deliver Towards the back half of the year. So and then I guess just general caution, right? I mean I talked about the things we don't control. And those are sizable macro forces We don't control. Speaker 300:48:02And so we think it's prudent to have an eye towards that. But I think we have a strong guidance out there to update it. We started the year with strong guidance. We updated that with strong guidance. And underlying that is what we believe, depending on where you are in that revenue range, It's pretty strong underlying operating performance. Speaker 600:48:22Yes. Look, I don't want to take the wind out of the sales. It's great update. I guess what I was getting at is just that I have to go back to 2014 to find the year where the Q1 Is not the low watermark operating margin for the year. And I feel like with that dynamic in mind, it seems like there's a lot of cushion in the guidance from a margin perspective over the balance of the year. Speaker 300:48:54Yes. I mean, we had a lot of I mean, when you start looking at this at the macro level, though, right, there's a lot of puts and takes in any given quarter. And We think that with those countervailing macro forces and how they could impact the back of the year, we think that We put strong guidance out, and we think we'll obviously end up somewhere in that range. And we got to execute well on the things that we can To keep those margins where they are and I went I enumerated 4 or 5 points that we think are most important. Speaker 600:49:27And it's coming back to the credit tightening element Being so topical, maybe approaching that from a different way, how do you see that potentially Impacting your M and A pipeline? Speaker 300:49:42I don't think it impacts our ability to do what we think we need to, to execute Other things we would like to execute. I think though, Sean, we know this, right? If the overall M and A environment is call. Unfavorable, less things may be for sale, right? Now a lot of the things we buy aren't necessarily in that typical M and A market. Speaker 300:50:05Most of the deals we've done over the last 3 years have been people selling their life's work, which is where we operate the best, right? That's where we are The most successful and we also drive the most value, not only for the person selling the business because they have a lot of things they're looking at, But for our shareholders, and it gives us new opportunities to grow. But look, private equity is not much in the market right now Between interest rates, covenants and credit tightening and the ability to place their secondary debt, they're not in the market. People that want a robust call. Auction around their process, therefore, are trying to sell their companies right now. Speaker 300:50:44And so put all that together, it's no secret, You follow the same things we do. M and A volumes are down significantly. That being said, for the kinds of things we I don't think it I would say, oh my God, it's the most robust pipeline I've ever seen. But what we have was I think is an acceptable pipeline Call of opportunities for us to pursue to continue to build on our footprint, add to our capability and enhance the services we're offering Across a number of geographies or new geographies or product lines would like that or product services would like that. Speaker 600:51:23Got it. Got it. All right. Thanks for the perspective. Many compliments to the team. Speaker 300:51:28Thank you. Operator00:51:31Thank you. And this concludes the question and answer session. I would like to return the call to Tony Guzzi for any closing comments. Speaker 300:51:37Thank you very much all. Call. We started well in 2023. We got a lot of work ahead of us, and hope you all are well. Have a good summer and be safe. Operator00:51:48Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect yourRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallEMCOR Group Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Fulton Financial Earnings HeadlinesHere's How Much $100 Invested In EMCOR Group 5 Years Ago Would Be Worth TodayApril 22 at 2:48 PM | benzinga.comA Look Into EMCOR Group Inc's Price Over EarningsApril 18, 2025 | benzinga.comMusk’s real agenda in D.C. In this urgent exposé, you’ll discover… How Elon and Donald Trump are quietly drawing a radical new map of America…April 24, 2025 | Porter & Company (Ad)Emcor Group (EME) Stock Moves -1.97%: What You Should KnowApril 17, 2025 | msn.comEMCOR Group, Inc. (EME): A Bull Case TheoryApril 17, 2025 | insidermonkey.comEMCOR Group, Inc. (EME): A Bull Case TheoryApril 17, 2025 | finance.yahoo.comSee More EMCOR Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Fulton Financial? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Fulton Financial and other key companies, straight to your email. Email Address About Fulton FinancialFulton Financial (NASDAQ:FULT) operates as a financial holding company that provides consumer and commercial banking products and services in Pennsylvania, Delaware, Maryland, New Jersey, and Virginia. It accepts various checking accounts and savings deposit products, certificates of deposit, and individual retirement accounts. The company offers consumer loans products, including home equity loans and lines of credit, automobile loans, personal lines of credit, and checking account overdraft protection; construction and jumbo residential mortgage loans; and commercial lending products comprising commercial real estate, commercial and industrial, and construction loans, as well as equipment lease financing loans. In addition, it offers letters of credit, cash management services, and traditional deposit products; and wealth management services, including investment management, trust, brokerage, insurance, and investment advisory services. Further, the company owns trust preferred securities; and sells various life insurance products. It provides its products and services through financial center offices, as well as through a network of automated teller machines, telephone banking, mobile banking, and online banking. 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There are 8 speakers on the call. Operator00:00:00Good morning. My name is Keith, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:27I I now would like to turn the conference over to your host today, Mr. Blake Mueller with FTI Consulting. Please begin. Speaker 100:00:33Thank you, Keith, and good morning, everyone. Welcome to the EMCOR Group conference call. We are here today to discuss the company's 2023 Q1 results, which were reported this morning. I would like to turn the call over to Kevin Matz, Executive Vice President of Shared Services, who will introduce management. Kevin, please go ahead. Speaker 200:00:51Thank you, Blake, And good morning, everyone. And as always, thank you for your interest in EMCOR and welcome to our earnings call for the Q1 Call. For those of you who have accessed the call via the Internet and our website, welcome to you as well. And we hope you have arrived at the beginning of our slide presentation that will accompany our remarks today. We are on Slide 2. Speaker 200:01:15This presentation and discussion contains certain forward looking statements and may contain certain non GAAP financial information. Page Stutes describes in detail the forward looking statements and the non GAAP financial information disclosures. I encourage everyone to review both Call. In conjunction with our discussion and accompanying slides. On Slide 3, the executives who are with me to discuss the quarter's results are Tony Guzzi, our Chairman, President and Chief Executive Officer Mark Pompa, Executive Vice President and Chief Financial Officer and our Executive Vice President and General Counsel, Maxine Mauricio. Speaker 200:01:50For call participants not accessing the conference call via the Internet, this presentation, including the slides, will be archived in the Investor Relations Call of our website under Presentation. You can find us at emcorgroup.com. And with that being said, please let me turn the call over to Tony. Tony? Speaker 300:02:07Yes. Thanks, Kevin, and good morning, and thank you for joining our call. I will cover Pages 4 through 6 in my opening comments. The momentum of the past few quarters continued in our business as we had an exceptional Q1 2023. Our team is executing well, and I appreciate the team's focus and dedication towards driving excellent outcomes for our customers. Speaker 300:02:28We earned diluted earnings per share of $2.32 on revenues of $2,89,000,000 We also grew remaining performance obligations or RPOs from the year ago period and from December 31, 2022 to a record $7,870,000,000 During the Q1 of 2023, we executed very well across all segments. And the broad themes that drove our business in 2022 continued, including the underlying strength in the retrofit markets with a focus on energy efficiency and IAQ or indoor air quality, which also leads to emissions reduction. Growth in the network communications and data center markets, strong demand in healthcare and high-tech manufacturing, including semiconductors And all things around the EV or electric vehicle value chain and traditional manufacturing and industrial projects driven by the onshoring supply And domestic capacity expansion. We also continue to see an increase in demand for our downstream refinery and petrochemical services. I will discuss these trends in more detail in my later commentary. Speaker 300:03:50Further, we are executing well on a good mix of business as evidenced by our improved gross profit margin execution to mitigate such headwinds, which we expect to continue through the balance of 2023. As our results demonstrate, we had a great start to the year in our Construction segments. This was due to the expertise and skill of our subsidiary and segment teams in estimating, winning, planning And executing complex projects across diverse market sectors, trades and geographies. Our Mechanical Construction segment continues to perform in an exceptional manner With an operating income margin of 8% and organic revenue growth of 8.7%. Driving this growth is strong penetration in high-tech manufacturing, Especially in the areas of semiconductors and the EV value chain as well as continued demand for data centers. Speaker 300:04:49We are winning in the traditional piping trades, but also in ever expanding fire and life safety trades. Our strong operating income margin is a result of exceptional job Call by planning and execution, supported by excellence in BIM and prefabrication. Our Electrical Construction segment's performance continued to strengthen To historical levels, we earned an operating income margin of 6.3% in the quarter, representing a 250 Base point improvement versus a year ago period, and we had organic revenue growth of 16.8%. We had robust performance across important sectors such as network and communications, which encompasses our data center work, Healthcare and Manufacturing and Industrial. We expect our results to continue to strengthen in the segment with improved project planning and execution, and have opened new markets and opportunities for us. Speaker 300:05:53Our U. S. Building Services segment had a strong Q1. We had operating margin of 5.2 We successfully executed project work and through improved planning, trade and job site coordination and estimating, managed to address some of the supply chain challenges that negatively impacted such work last year. We often talk about the work we do to Our customers' energy efficiency and indoor improve air quality, which then results in emissions reductions and supports our customers' sustainability goals. Speaker 300:06:34Our building services companies work through a diverse set of channels to deliver these projects and services to commercial, institutional, health care and manufacturing We serve these customers directly, but also through major real estate providers, utilities and ESCOs or energy service companies. We see our ability to serve our customers through such diverse channels as a competitive advantage, and we'll continue to seek out the broadest set of customers possible. The results of our Industrial Services segment continue to improve at a steady space, earning an operating margin of 4.5% in the Q1 call. We executed a more normal turnaround season and saw improved demand and mix for our shop services. We continue to execute work supporting our customers' increased demand for energy and operating efficiency as well as the renewable fuel expansion. Speaker 300:07:30The segment's performance trajectory continues to improve, and we would be even more positive about this segment's outlook If solar panel supply chain issues were not delaying our execution of electrical work Supporting the solar fields. Our U. K. Team continues to execute well despite a challenging market and foreign exchange headwinds. We continue to grow our customer base and are happy with our mix of facilities management contracts and owner direct project work. Speaker 300:08:01We leave the quarter with an excellent mix of work and our record RPOs of $7,870,000,000 We have a strong balance sheet to support our organic growth outlook and our capital allocation model. And with that, I will turn the presentation Over to Mark. Speaker 400:08:21Thank you, Tony, and good morning to everyone participating on the call today. For those accessing this presentation via the webcast, we are now on Slide Call. Over the next several slides, I will augment Tony's opening commentary and review each of our reportable segments' 1st quarter operating performance as well as other key financial data derived from our consolidated financial statements included in both our earnings release announcement and Form 10 Q filed with with the Securities and Exchange Commission earlier this morning. So let's expand our review of EMCOR's Q1 performance. Consolidated revenues of $2,89,000,000 are up $297,900,000 or 11.5 percent over quarter 1 2022. Speaker 400:09:02Our Q1 results include $35,200,000 of revenues attributable to businesses acquired pertaining to the period of time that such businesses were not owned by EMCOR in last year's Q1. Excluding the impact of acquisitions, 1st quarter consolidated revenues increased approximately $262,700,000 I would like to highlight that our consolidated revenues of $2,89,000,000 established a new first quarter record and represents our 2nd best ever quarter. With that being said, I will now cover the results of each of our reportable segments starting with revenue. United States Electrical Construction segment Quarter 1 revenues of $644,700,000 increased $122,700,000 or 23.5 percent from 20 22's comparable quarter. Excluding incremental acquisition contribution, this segment's revenues grew a strong 16.8% organically quarter over quarter. Speaker 400:10:03Increased project activity within the Network and Communications, Healthcare, Manufacturing and Hospitality and Entertainment market sectors More than offset revenue declines in transportation and traditional commercial market sector activity. We continue to experience strong demand from our data center customers As evidenced by the growth and remaining performance obligations within the network and communications market sector, and we are executing against these contracts. Revenues of our United States Mechanical Construction segment of $1,100,000,000 increased approximately $86,000,000 or 8.7 percent from the year ago period. Revenue growth during the quarter was predominantly derived from the high-tech and network and communications market sectors. Increased activity And within the quarter included both mechanical construction as well as fire protection services for customer projects supporting the design and manufacture of semiconductors, Electric vehicles and or related battery technologies. Speaker 400:10:59Additionally, similar to our Electrical Construction segment, Our mechanical construction businesses are experiencing strong demand resulting from the growth in data center development. Both our electrical and mechanical Construction segments established new 1st quarter revenue records in 2023 and consequently our total U. S. Construction revenues of 1 point $72,000,000,000 represent a 1st quarter record as well. This performance surpassed that of the prior year period by $208,600,000 Call or 13.8%. Speaker 400:11:31United States Building Services segment revenues of $725,400,000 increased $89,800,000 or 14.1 percent, representing an all time quarterly record for this segment. Growth was primarily experienced within the segment's Mechanical Services division, which generated incremental revenues from each of its service lines. Notably, we saw an increase in HVAC project and retrofit work due to slightly improved equipment availability that Additionally, this segment continues to experience strong demand for building automation and control solutions as our customers print. We believe that this will be an area of continuing demand for us. Our United States Industrial Services segment generated revenues of $330,900,000 An increase of $20,100,000 or 6.5 percent year over year. Speaker 400:12:37Despite the ongoing volatility in the broader oil and gas industry, We continue to see a steady resumption in demand for our field services offerings, and as a result, we achieved a solid start to 2023. Additionally, we have experienced an increase in newbuild heat exchanger orders and pull through cleaning and maintenance within this segment's shop services operations. United Kingdom Building Services segment revenues of $110,900,000 represent a reduction of $20,600,000 from last year's Q1. Unfavorable exchange rate movements due to the weakening of the pound sterling negatively impacted this segment's quarter 1 2023 revenues by to $10,800,000 Excluding the impact of foreign exchange, EMCOR's U. K. Speaker 400:13:21Revenues decreased due to the loss of Certain facilities maintenance contracts not renewed pursuant to rebuild as well as a reduction in project activity within with certain customers period over period. Please turn to Slide 8. Selling, general and administrative expenses of $281,200,000 represent 9.7 percent of 1st quarter revenues and compared to $252,600,000 9.7 percent of revenues in the year ago period. SG and A for the current year's quarter includes approximately 5 increase in SG and A of $23,300,000 With EMCOR's continued revenue growth, we have added personnel to support our back office and contract administration functions, resulting in increases in salaries and benefits from the corresponding 2022 period. Additionally, with the increase in both our quarter 1 operating income and diluted earnings per share, as well as the positive revision in our full year 2023 EPS outlook, Call, which Tony will cover later in this morning's presentation, we have seen a resulting increase in incentive compensation expense to reflect the actual and anticipated improvement in year over year performance. Speaker 400:14:40Reported operating income for the quarter was $154,900,000 5.4 percent of revenues, it favorably compares to approximately $100,000,000 of operating income or 3.9 percent of revenues a year ago. Consistent with my revenue commentary, the current quarter's operating income and operating margin performance each represent new quarter one records for the company. Specific quarterly operating income performance by segment is as follows. Our U. S. Speaker 400:15:09Electrical Construction The segment earned operating income of $40,500,000 an increase of $20,500,000 from the comparable 2022 period. Reported operating margin of 6.3 percent is significantly improved from last year's quarter given a more favorable revenue mix as well as reductions in labor productivity and efficiency. Although we are still experiencing various degrees of supply chain difficulties, The level of impact in the current year has been less severe than that experienced in the early part of 2022. This is due to both improved equipment availability and our subsidiary management team's ability to adapt to this less than optimal operating environment. 1st quarter operating income of our U. Speaker 400:15:59S. Mechanical Construction segment of $86,200,000 represents a $27,800,000 increase from last year's quarter An operating margin of 8% represents a substantial increase from the 5.9% earned a year ago. In addition to this segment's exceptional project for the primary factors driving this quarter over quarter improvement. Operating income for U. S. Speaker 400:16:31Building Services is 37,700,000 call, or 5.2 percent of revenues and compares to $24,200,000 or 3.8 percent of revenues in 20 22's Q1. Consistent with the segment's revenue performance, these improvements were driven by their Mechanical Services division, which saw increases in both gross Call. Profit and gross margin due to better project execution as well as the favorable impact of negotiated price adjustments, which have been enacted in response to the inflationary pressures we've experienced. Compared to the year ago period, our U. S. Speaker 400:17:04Industrial Services segment Operating income of $15,000,000 or 4.5 percent of revenues represents an increase of $1,800,000 with a slight expansion in operating margin, Better pricing and mix, coupled with more normalized demand are the primary reasons for these quarter over quarter improvements. UK Building Services operating income of $5,400,000 represents a decrease of $5,200,000 while operating margin of 4.9% was reduced from 8.1 percent of margin a year ago. Exasperating the impact of reduced quarterly revenues on operating income, this segment experienced a shift in the mix in call. The size of project work, which resulted in a decrease in gross profit margin. Additionally, contributing to the unfavorable period over period comparison Call is the impact in 20 22's Q1 of a successful project closeout, which enhanced reported operating margin in the prior year period. Speaker 400:17:59This segment's operating income was also negatively impacted in the quarter by $500,000 resulting from unfavorable exchange rate movements. We are now on Slide 9. Additional financial items of significance for the quarter not addressed on the previous slides are as follows. Gross profit of $436,100,000 is higher than the comparable prior year period by $83,500,000 or 23.7 percent And gross margin of 15.1 percent is up 150 basis points quarter over quarter. Diluted earnings per common share is $2.32 As compared to $1.39 in 20 22's Q1, the increase in quarterly net income combined with the reduction in our weighted average shares outstanding has led to a $0.93 EPS improvement year over year. Speaker 400:18:50Our share repurchases in 2022 have positively impacted Our Q1 2023 diluted earnings per share by $0.25 Please turn to Slide 10. EMCOR's balance sheet maintains its strength and liquidity, positioning us to fund organic growth, pursue strategic M and A opportunities and return capital to shareholders. Fluctuation of note within our balance sheet when compared to December of 2022 are as follows. Cash on hand of just over $420,000,000 has decreased by $36,400,000 During the quarter, we utilized $84,600,000 of cash to fund our operations, Deployed $25,400,000 for investing activities, including capital expenditures and acquisitions and returned $23,200,000 to stockholders through share repurchases and dividends. These uses of cash were partially offset by borrowings during the period of $100,000,000 under our revolving credit facility, Resulting primarily from our organic growth during the period, our working capital balance has increased by nearly 190 $3,000,000 The slight increase in goodwill was entirely a result of the 2 asset acquisitions completed by us during Call. Speaker 400:20:03Quarter 1 of 2023, while identifiable intangible assets have decreased marginally as the assets recognized in connection with these acquisitions We're more than offset by amortization expense during the period. Total debt has increased by just under $100,000,000 As a result of the additional borrowings under our revolving credit facility previously referenced, this increase in debt is the primary reason for the change in our debt to capitalization ratio call reflected on the bottom of Slide 10. And lastly, our stockholders' equity balance has increased by just over $92,000,000 Call. As our net income for the period exceeded our share repurchases and dividend payments. With my portion of this morning's slide presentation completed, I will now return the call back to Tony. Speaker 300:20:47Yes. Thanks, Mark. And I'm going to be on Page 11, remaining performance obligations by segment and market. The robust demand for our services continued the trend we experienced in the final three quarters of 2022 into the Q1 of 2023. Total company remaining performance obligations or RPOs at the end of the first quarter We're almost $7,900,000,000 up a little over $1,900,000,000 or 32% over the March 2022 total of $5,950,000,000 All but approximately 169,000,000 Of the $1,900,000,000 increase was organic. Speaker 300:21:31Additionally, 1st quarter project bookings were also strong With RPOs increasing $414,000,000 or 5.5 percent in the 1st 3 months of 2023 from year end call. Strong underlying demand in our most resilient sectors. RPO growth was broad based with each of our domestic reporting segments Experiencing double digit RPO growth in the Q1 versus the Q1 in the year ago period. Further, each of these four business segments saw RPOs increase in the Q1 from year end 2022. Our 2 domestic construction segments experienced strong project growth year over year with group. Speaker 300:22:26Combined RPOs increasing just under $1,700,000,000 or 36% from March 2022. The U. S. Mechanical Construction segment saw RPOs increased by $934,000,000 or 28%, While the U. S. Speaker 300:22:44Electrical Construction segment saw an increase of $754,000,000 or 58%, Much of the construction segment's RPO increased results from continued demand for hyperscale data centers, Call, which includes the production and development of electric vehicles, battery plants and other manufacturing and industrial facilities driven to support this important new industry. We also are seeing increased demand from the on shoring of manufacturing and industrial Facilities as well as the expansion of capacities by some of our customers. Also across this whole EVV value chain and Call. Across this reshoring and capacity expansion, we're seeing strong demand for our fire and life safety services. Our U. Speaker 300:23:45S. Building Services RPO levels increased $237,000,000 or 23% from March 2022 And now stands at $1,250,000,000 and a lot of that is a small to midsized project and service work. Like all of 2022, this quarter saw continued project awards in its Mechanical Services division, which is focused a lot on call. Energy efficiency, indoor air quality and general retrofit projects as well as repair service work with growth in all the channels we serve to deliver these projects. U. Speaker 300:24:22S. Industrial Services grew RPO slightly year over year due to an increase in demand for our heat exchanger soft services and products. Moving to the right side of the page, we show RPOs broken down by market sector. As you can see, we have expanded sector segmentation to 10 market sectors. As we stated in our February call And for greater transparency into our current and future work, we split out what was previously reported as commercial RPOs into 3 sectors. Speaker 300:24:54The first of which is at the bottom is the traditional commercial projects, and that's the golden bar. And it includes work in office buildings, warehouse, Call. Retail and Restaurants and Other Commercial Buildings. Commercial Sector RPOs have increased $198,000,000 We're a little over 12% on a year over year basis. We disaggregated these commercial sectors into other ones to include network and communication, And that is the Maroon Bar. Speaker 300:25:24And that includes work that we've previously referred to as our telecommunications projects, which are data centers, data and fiber projects and network cabling projects. This sector has grown RPOs $516,000,000 or 86% year over year. We now have a group called High-tech Projects, And it's in the high-tech manufacturing sector, as shown by the green bar. And these projects and services are in the semiconductor, biotech, Life Sciences, Pharmaceutical and the EV value chain. Year over year, high-tech RPOs have increased $481,000,000 or over 100%. Speaker 300:26:06We believe that these industries in this high-tech sector, high-tech manufacturing sectors Arren, for the most part, in the initial stages of capacity expansion and development, and that's where we continue to expect to see growth. And It will be up and down a little bit as these are large projects a lot of times coming in and that will drive growth in our RPOs. We also believe that to date, there has been negligible impact of the government legislation that was designed to support these sectors. It just was passed, and we think that legislation will not only increase further demand, but we think it will elongate the duration of that demand. As I've said before, we continue to broaden our fire and life safety services across all these sectors. Speaker 300:26:53That would be the gold, The maroon and the green, and we continue to provide projects across all sectors. Looking at other market sectors and year over year activity, Healthcare RPOs are up 55%, institutional is up 10% and manufacturing and industrial up 35% And short duration projects, which include much of the HVAC and repair service work, it's flat, maybe up 1%. And partially offsetting this increase was a reduction in transportation and water and wastewater RPOs. And looking at our market sector Participation, it is noteworthy to see how balanced our participation is. This balance demonstrates One of the strengths we have highlighted before, which is our ability to provide electrical and mechanical construction, retrofit and repair service technical labor and solutions across diverse nonresidential market sectors and U. Speaker 300:27:50S. And U. K. Geographies. We have decent work in hand and continue to bid new project opportunities across many nonresidential market sectors. Speaker 300:28:00Our project mix is good, and we are executing well in all phases of project delivery in what is still a very Challenging operating environment. I have mentioned several of these robust sectors before today that drive our growth. On the next page, on Page 12, you'll see highlights in more depth that explain them to you. I am not going to cover that page in detail today because I think It would be redundant with the commentary I just made explaining our RPOs. And with the enhanced disclosure around commercial, I think we've met many of the things we talk about on Page 12. Speaker 300:28:34And with that, I will now turn to Page 13 and 14. We expect our success to continue in 2023 despite a market that has uncertainty in it. We are going to leave our revenue guidance call. At $12,000,000,000 to $12,500,000,000 in revenues. But we are going to increase our earnings per diluted share guidance From what was a range of $8.75 to $9.50 to $9.25 to $10 And earnings per diluted share is what we now expect our guidance to be. Speaker 300:29:10Our RPOs remain strong, and we continue to see demand in key areas like we talked call. Commercial retrofit, semiconductors, health care, data centers, bio life sciences. We also are seeing strong demand, as I said before, for our fire life safety services across most major end markets. The supply chain issues and challenges that we experienced through the last 18 months still exists with long lead times, unreliable delivery schedules for finished systems like switchgear and HVAC equipment. We also expect to continue to see inflationary pressures for labors, materials and fuel. Speaker 300:29:45However, as we did in most of 2022 And in the Q1 of 2023, we will continue to adapt to better planning, estimating and resource allocation. So where do we end up in this guidance range will depend on several factors, some in our control and some outside of our control. And I'm going to cover first the ones that we believe that are more in our control, and it's not an exhaustive list, but it is the major ones. The first thing we need to do is we need to continue to increase our use of BIM or building information modeling, prefabrication and enhanced planning to drive efficiency, improve safety and increase the quality and productivity of our service delivery. We need to continue to pay attention and enhance our pricing and estimating to mitigate the impact of inflation and supply chain challenges. Speaker 300:30:343rd, we need to leverage our reputation as an employer of choice to staff our jobs with the right mix of skills and classifications To not only enhance our labor productivity but also our safety and cost. 4th, we need to train and educate our employees at all levels of the organization to To work smarter and lead better. 5th, we need to be vigilant with our commercial service customers and actively monitor their financial condition and payment status with us Yes, they remain challenged with occupancy and now refinancing issues. And finally, we always look to gain SG and A leverage. However, we always will have areas beyond our control that could affect our performance. Speaker 300:31:13Number 1, material sourcing and lead times continue to challenge the market and our customers. I don't think that's improving in 2023, not much anyway. Number 2, higher interest rates and economic uncertainty may impact the demand for some of our customers' products and Services, and then it will impact us. I expect this move this will move some projects in the planning stage to later periods, And those in the decision stage may be postponed, rephased or rescoped. Number 3, Disruption caused by uncertain energy markets and supply, especially as the conflict in Ukraine continues and it could potentially intensify. Speaker 300:31:51OPEC took supply out of the market and China's reopening increases demand. However, we expect to continue to generate strong operating cash flow, And we'll continue to execute our long term and successful capital allocation strategy. The balance is supporting our organic growth and acquisition While returning cash to shareholders through dividends and share repurchases. Finally, as always, I would like to continue to thank the EMCOR team None of this would be possible without your discipline, teamwork and dedication to drive the best possible results for our customers. And as a result of serving our customers so well, we continue to produce outstanding results for our shareholders. Speaker 300:32:33And with that, Keith, I will take questions. Operator00:32:36Thank you. At this time, we will begin the question and answer session. And today's first question comes from Matt Thillman with D. A. Davidson. Speaker 500:32:59Hey, thanks. Good morning. Congrats on Speaker 300:33:01a great quarter. Speaker 500:33:01Good morning, Matt. Speaker 300:33:02Thank you. Speaker 500:33:04Tony, I was just wondering if you could comment on your traditional commercial vertical just in the context of these Kind of heightened concerns around credit tightening. It seems like that'd be an area you may have the most exposure or risk, but I'd love to hear Sort of how you'd pick that apart? Are there high levels of retrofit and upgrades within that vertical versus new construction? Any anecdotes there would be Really helpful. Speaker 300:33:31I mean so that's why we did the enhanced disclosure. Then you can see the yellow bars traditional commercial. And it's the part that's up leased year over year, and it's essentially flat from year end. Now part of that is a result of we're starting to burn through That's where you really saw the impact of elongated supply lines because those projects that we do for the most part are meant to be quicker hitting. So So if you think about EMCOR's commercial backlog, probably less than 1% of what we do today to 1.5% is what I would call new out of the ground commercial or high rise residential. Speaker 300:34:11At one time, that was very different. The bulk of the business that's in that Traditional yellow section or even that pink section up top, and that pink section has you could take that pink section and spread it across all our other sectors there, The short duration projects, but that yellow for the most part is aftermarket. It's short duration projects, not short duration, it's major retrofit, It's retrofit. It's tenant build out. It's ad moves and changes. Speaker 300:34:40It's where our longer duration energy retrofit projects are. It's that kind of stuff. It's the vast preponderance of what we do in commercial now. And then as you move up, right, we talked about the maroon and the green. I mean, the reality is that's a good breakout, right, because that's where the growth is coming for us. Speaker 300:34:59And like we said, that growth was coming even before the enhanced legislation. I'd like the Chips Act and IRA. We expect that to even continue more. And I talked about it maybe growth or elongation. But we're careful in that commercial call. Speaker 300:35:13Sure. We've been careful in that commercial sector for a long time. We're especially careful when it's developer led. We pay attention to a lot of collections, and we pay attention to their financing. Do I think new Grille commercial is a growth market Right now, no. Speaker 300:35:32Do I think there's opportunities with well capitalized customers? The answer is yes. Well, I think the energy efficiency market has legs for a while to go. And I like the way we service that energy efficiency market and the short duration project market. We service that through a lot of different channels. Speaker 300:35:50We go direct to the owner. We go to the owners, what would be called their in house general contractor or Construction manager that may run all their projects like in a university or a manufacturing setting, but we're the contractor of choice and have been there for a while. We go through the large real estate providers and facilities managers. We go through that channel. We go through utilities that have programs where they direct where they helps fund and direct and they have the salespeople that work with us and sell the project. Speaker 300:36:20And then we go through the major ESCOs where they may sell project and now they actually have people actually have to go figure out how to get it done. And we have the sales force that knows how to sell to them and sell to every one of those channels. And so we like that position. We think that market has legs. So it's a complex answer, But that's why we did the enhanced disclosure because we were starting to make it harder for us to have people understand Where the real growth and with that commercial sector the way we traditionally defined it was. Speaker 500:36:52Okay. I appreciate that. Just I guess staying on the topic of the RPOs, Tony, the healthcare Piece also really sticks out to me, just the continued expansion there. I guess my question is, would you consider that A fairly diverse group of customers and a broader trend or is this aligned with some specific customers that just happened to be spending? Speaker 300:37:16It's both. It's both, Brent. It's both, right? On one sense, specific customers drive that backlog because they can be large projects. But if you look over 2 or 3 year period over time and the way we think about it, it's part of a broader trend. Speaker 300:37:32They got, Speaker 600:37:35Conference Call. Quite frankly, disrupted a little bit Speaker 300:37:36with COVID because they weren't building new facilities in the middle of COVID. They were building emergency facilities but not new facilities or retrofitting so you New multiuse. So some of this is pent up demand on what should have been capital planning, but it's a long term trend. Hospitals and big health care facilities and outpatient Facilities. They need to be cleaner. Speaker 300:37:55They need to have better ventilation. They need to have the ability to flex from positive pressure to negative pressure in our world. They have much more complex low voltage needs. They have much more complex general electrical needs. They have to put backup power. Speaker 300:38:09And while they're doing all that, they have to think about their Sustainability goals and how they're going to operate that facility more efficiently. Speaker 500:38:19Okay. Yes. Thanks, Tony. And the last one, just, I guess, which of the 2 construction business groups Are you seeing still sort of more profound challenges related to the supply disruptions, inflation? Is it more electrical or mechanical? Speaker 500:38:36Because It looks like the electrical margin definitely snapped back big from last year, but maybe a little below what levels we've seen in the past. I'd just Love to kind of understand that. I think Speaker 300:38:49I would say probably electrical more than mechanical. It's a more consolidated market for major end products, and it's more on the critical path. So we've had to rejigger our means and methods We'll work around that. Mechanically, we buy a lot of equipment. We do a lot of HVAC work. Speaker 300:39:10We also do a lot of just straight piping work, supporting big process plants or where the owner bought the equipment. And so they They do that in the electrical business, too, for major gear. But my experience has been when you look at things like generators and switch gears And Smart Panels, the delivery performance is not great yet. The mechanicals got a little better. At least what they say they're going to do, they do. Speaker 300:39:35But the electrical lead times haven't really moved much down at all. The mechanicals have started to move down a little bit. And I think, in general, the mechanical sales forces are Speaker 400:39:43more in tune with their factories. Speaker 300:39:43And I call. Sales forces are more in tune with their factories, and I think they have better visibility to keep us up to date on what's happening Then the electrical sales force. Speaker 500:39:57Okay, really helpful. Speaker 300:39:58That's what I meant. Speaker 500:40:00Call. Yes. Okay. Thanks guys. Yes. Operator00:40:06Thank you. And the next question comes from Matt Talhaimehr with Thompson Davis. Speaker 700:40:12Hey, good morning guys. Great quarter. Speaker 300:40:13Thanks, Adam. Speaker 700:40:16On the industrial Business that was your best quarterly op income in 3 years. Just curious what your visibility call. Is like there and what the if you can build on the Q1 result. Speaker 300:40:30Look, we think things have gotten better. We like where our shop backlog is at. We like what that portends for the future. We think we're in a more normalized operating environment, which is good. We expect to continue to operate normally. Speaker 300:40:45We have no reason to believe we don't have a normal fall turnaround season coming up. I think the long pole in the tent is a new product we have, right, or a new service, which is building these alternative energy, the renewables, Especially around solar, and that's clogged up everywhere. But Mark, I mean Speaker 600:41:02Yes, Adam, the only thing I would Speaker 400:41:03add is just don't lose sight of the fact Call. So it's kind of bookends quarter 1 and quarter 4. But having said that, we saw, as Tony mentioned a couple of During his pre prepared remarks, we saw as close to a normal operating environment as we've seen in a while with that customer base. And it's a lot of it is mix driven as well. So we're deploying the qualified label we have. Speaker 400:41:31And if our customers adhere to their to the schedules that we've been planning with them, we're optimistic that 2023 is going to at least look like A normal 12 month performance period for the Industrial Services segment. Speaker 300:41:45And that's reflected in our guidance. And part of that's reflected in our guidance, Jacob. Speaker 700:41:51Okay. What is the outlook for solar panels? I don't know that I follow it that close. Speaker 300:41:58There are certainly people way better qualified to talk about that than us as part of our business. But based on what we see, not good. It's still clogged up. I don't think there's going to be this big uptick this year. But again, that's sort of There's people that know a lot more about that than me. Speaker 300:42:19As someone that follows it closely through our bidding at work, we see a lot of delayed work. Speaker 700:42:25Call. And then, I guess, Brent kind of touched on this, but I just wanted to touch on your macro comment. And there's I guess the debate is, Where do you think macro would manifest itself? Because it seems like a lot of these big projects are kind of locked and loaded and there's government support. So maybe those big projects go, but there's risk to the short duration projects? Speaker 500:42:48Yes. I think there's Speaker 300:42:53It's hard to tell. I mean, the short duration projects have something that's been driving them for a while. And so there's this counterbalancing view out there, right, in my mind because of energy pricing and people's drive for more sustainable facilities. So on one hand, you sit there and say, well, I just won't do the project. On the other hand, you say, every day I don't do that project, my cost structure becomes worse Because energy prices continue to become uncertain and escalate. Speaker 300:43:21And most of our major customers have committed to sustainability goals. And you can't get there unless you do equipment replacement and modernization and all the something as simple as fixing Compressor lines in a manufacturing facility, that requires a lot of work. It requires new equipment. If you take out something that used to be 0 point 68 kw per tonne and now you're putting in something with 0.32 kw per tonne on a chiller and it has variable speed. That's a market change in your operating cost profile. Speaker 300:43:54And then you're going to start thinking about, okay, I have to do that. If I don't do that in these triple Leases, which has always been the bane to the existence of energy efficiency, my building may no longer be competitive, right? So I have all these forces going on around me. And so I think that if you're heavily exposed to new build commercial, you probably have a different outlook than we have on that. I also think if you think of some of these major projects that are going on, on those big things I've talked about from reshoring, EV value chain, Semiconductors, data centers. Speaker 300:44:28And remember, there's a whole ecosystem around each of those. I guess most of this was happening without government support. That can only help it now, and it can only elongate it in my mind. And most of these customers are not worried about 500 basis point expansion in interest rate costs. 1, they're self funded for the most part and the kind of value they're going to create over what they're doing. Speaker 300:44:53And then you layer on top of that for some of these industries the demands with respect to national security and the onshoring of some critical industries, I think that mix drives long term demand in a favorable way. And look, for us, we have great RPOs. We expect to continue to have great RPOs. From this high level, that could plus or minus a little bit quarter to quarter, but we expect our overall trends over the next couple of years to be pretty good As on in these major sectors. But we'll see. Speaker 700:45:24Right. Okay. Good color. Thanks, guys. Operator00:45:28Thank you. And the next question comes from Sean Eastman with KeyBanc. Speaker 600:45:33Hi, team. Great start here. Very good start. I thought the big takeaway from the Q1 was really the margins. I mean, I think this is a record Margin performance for our Q1, yet you guys are saying there's still kind of lingering supply chain challenges. Speaker 600:45:54Is there something unsustainable that came through in the Q1? Or are we just Kind of effectively not updating the outlook, sort of just flowing through a better start to the year. Speaker 300:46:09I don't know, Sean. I think taking our outlook up to $9.25 to $10 from $8.75 to $9.50 is a pretty big move. I think the revenue velocity is in the business, and we said that in our initial guidance. And I think further, if you extrapolate that, I think that what we're really saying in the guidance is we expect strong margins through the year. Now we are mix dependent. Speaker 300:46:37And projects start, they finish. But we there was nothing extraordinary in Group. 1st quarter, right, Mark? Speaker 400:46:44Yes. Sean, the only thing I'd point out, if you recollect from quarter 1 last year, We did have some additional headwinds with regards to project write downs both in electrical and mechanical construction. The extent of write down activity in the Q1 of 2023 was not at that same level. The other thing which is extremely difficult to call. Confirm relative to 2023's quarter 1 is with the fairly mild winter weather pattern we had in In most of the geographies we operate, we didn't deal with the same level of job site difficulties with regards to fighting weather. Speaker 400:47:23But Like I said, that's difficult to quantify. It does not have an outsized impact on the quarter performance. And the only thing it might have done is pulled some activity Forward in the year. Speaker 300:47:33And I think the other thing that bolstered 1st quarter operating margins, operating income margins is this is a seasonally strong Quarter for Industrial. And so we have to factor in what second and third quarter mean to us there, especially if we can't deliver some of the solar work that we hope to deliver Towards the back half of the year. So and then I guess just general caution, right? I mean I talked about the things we don't control. And those are sizable macro forces We don't control. Speaker 300:48:02And so we think it's prudent to have an eye towards that. But I think we have a strong guidance out there to update it. We started the year with strong guidance. We updated that with strong guidance. And underlying that is what we believe, depending on where you are in that revenue range, It's pretty strong underlying operating performance. Speaker 600:48:22Yes. Look, I don't want to take the wind out of the sales. It's great update. I guess what I was getting at is just that I have to go back to 2014 to find the year where the Q1 Is not the low watermark operating margin for the year. And I feel like with that dynamic in mind, it seems like there's a lot of cushion in the guidance from a margin perspective over the balance of the year. Speaker 300:48:54Yes. I mean, we had a lot of I mean, when you start looking at this at the macro level, though, right, there's a lot of puts and takes in any given quarter. And We think that with those countervailing macro forces and how they could impact the back of the year, we think that We put strong guidance out, and we think we'll obviously end up somewhere in that range. And we got to execute well on the things that we can To keep those margins where they are and I went I enumerated 4 or 5 points that we think are most important. Speaker 600:49:27And it's coming back to the credit tightening element Being so topical, maybe approaching that from a different way, how do you see that potentially Impacting your M and A pipeline? Speaker 300:49:42I don't think it impacts our ability to do what we think we need to, to execute Other things we would like to execute. I think though, Sean, we know this, right? If the overall M and A environment is call. Unfavorable, less things may be for sale, right? Now a lot of the things we buy aren't necessarily in that typical M and A market. Speaker 300:50:05Most of the deals we've done over the last 3 years have been people selling their life's work, which is where we operate the best, right? That's where we are The most successful and we also drive the most value, not only for the person selling the business because they have a lot of things they're looking at, But for our shareholders, and it gives us new opportunities to grow. But look, private equity is not much in the market right now Between interest rates, covenants and credit tightening and the ability to place their secondary debt, they're not in the market. People that want a robust call. Auction around their process, therefore, are trying to sell their companies right now. Speaker 300:50:44And so put all that together, it's no secret, You follow the same things we do. M and A volumes are down significantly. That being said, for the kinds of things we I don't think it I would say, oh my God, it's the most robust pipeline I've ever seen. But what we have was I think is an acceptable pipeline Call of opportunities for us to pursue to continue to build on our footprint, add to our capability and enhance the services we're offering Across a number of geographies or new geographies or product lines would like that or product services would like that. Speaker 600:51:23Got it. Got it. All right. Thanks for the perspective. Many compliments to the team. Speaker 300:51:28Thank you. Operator00:51:31Thank you. And this concludes the question and answer session. I would like to return the call to Tony Guzzi for any closing comments. Speaker 300:51:37Thank you very much all. Call. We started well in 2023. We got a lot of work ahead of us, and hope you all are well. Have a good summer and be safe. Operator00:51:48Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect yourRead morePowered by