EME - Earnings call transcript Q3 2019

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Operator

Good morning. My name is Laura, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group, Third Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Ms. Instructions] [Operator FTI with may begin. Jamie Consulting, Baird you

Jamie Baird

everyone. you, EMCOR the and morning, Laura, good Welcome Group to Thank conference call.

We reported I discuss results, the ahead. who are the company's Shared President Kevin please go will to XXXX to here Matz, Services, third call Executive over which earlier like would were morning, this to turn introduce of Kevin, today Vice quarter management.

Kevin Matz

XXXX. the week. I already, to Thank believe EMCOR everyone. Group's third And quarter call conference Halloween Jamie. the of you, fast Welcome for can't by how year good earnings gone morning, has this

For accessing we our Internet hope the you presentation beginning those and arrived remarks and today. have slide of accompany the at who the call will you welcome, of are our website, our via that

presentation everyone Slide non-GAAP discussion disclosures review Page forward-looking to forward-looking statements. detail This encourage describes the in statements slides. with and discussion advance I certain to X. X, disclosures. and contains in accompanying the our both conjunction information and financial Please

Slide Guzzi, Financial discuss nine our are Vice Pompa, Chief the Executive They with Treasurer; months and and and results. X, quarter Tony me to our who Senior Mauricio. the Chairman, Executive Officer; Vice and President President, Chief Mark Counsel, depicts and President General Officer, our are executives Maxine

in call not Relations call archived For the our the be under accessing via conference presentations. Investor the the including section participants will Internet, this slides presentation website of

that emcorgroup.com. us to find can let With Tony? at please Tony. the me You over said, turn call

Anthony Guzzi

and be comments. X I my covering will pages Yes. through Thanks, in Kevin, good X opening morning, and

Cash billion, income $XX.X per from $XXX.X and to operations very third quarter. million. at records terrific EMCOR Group $XXX.X $X.XX. continuing million, earnings was flow We net company another attributable for We at quarter diluted from of $X.XX revenues at income new strong operations operating share at million, had set

year ago good third revenues. tough these set this period of the new very We with and SG&A quarter also comparison We quarter cost a had versus still had control records. at X.X%

that was organic growth revenue of with growth. X.X% revenue Our XX.X% this quarter

have billion, from strong million year up performance of year-ended or We $XX.X million and ago of $XX.X period, obligations $X.XX XXXX. base a remaining from a RPOs the up

to the organic and strong, our year-to-date. strong Our quarter despite RPOs in growth revenue very be continue

continue for customers. We to well execute our

third quarter a X.X%, margins EBITDA Our quarter X.X%. strong of we are and good income at had margins operating third

take minute the a Now, highlights our cover in me of quarter let from some and segments. the

Our perform margins Mechanical operating and We income very X.X%. Electrical had to of continue Construction combined segments well.

within of duration short discussed manufacturing, based a have work, on our data performance had scope, we work. projects. large growth of We As in previously, commercial strong band income will move healthcare, and revenue centers, of margins mix strong stage operating completion on complex our

planning, are we projects. estimating, on selection, we in with closing Overall, these focus job a labor extremely out and our large both successfully management, are segments executing well pre-fabrication, and small

are to application teams well pre-fabrication. construction right the and look building through continue and of to the information or executing resulting pre-planning, the gain BIM, Our modeling productivity extensive for opportunities

market. labor of a good this tight development doing also are job in We very very workforce

operating Our had of segment XX.X% Building of growth X.X%. quarter. revenue exceptional and income Services an had We margins

mix quarter the services businesses. good, in mechanical revenue and work very our commercial strong Our of with in growth site-based is

segment Our capability. adding exceptional has been this acquisition-integration in geography and

management the executed of implementation We in contracts. said and precision had large last year, we with facility several well complex

level our and of focused The metrics. all positive is performance operating We team discipline continue Building executing with relevant is a across having impact high focus. are looking Services to on and and a

operating is but quarter It their the we capital last from year-to-date return is performance. tough seeing segment a quarter are Services had Industrial Our the augmenting on an unplanned was basis, income strength are third in basis, segment slow or the period behind unless year versus quarter helping issue improved our comparison the project quarter this with significant a with seasonally to and maintenance ago customers year to that in a little always work. much a important we remember a

our over not and EBITDA into income hope work the rebuilding with return and they've digits. team product six high-single and Our margins, of on of businesses through margin last some margin the operating an more the mix emphasis been our is offerings satisfied to our quarters niche our base

executing our At are executing well point customers. customers, in the this positioned time, normal place in and keep with a fall season. we are We have for team to we these turnaround

exchange well. foreign with We growth the lost Our some the perform UK of sterling. continues weakening from pound segment to

continue operationally complex strong, facilities. are to new is their partner strong who The We technical manage important customers new a executing very to customers. in team continues and win and to well, the require UK and win strong UK,

Our balance and sheet remains liquid strong.

for I'll of Mark, performance. that, it and With the year-to-date discussion detailed a turn to over you our quarter

Mark Pompa

the today. call Thank you, good on morning participating to Tony, and everyone

now this webcast, Slide X. are For the on via those presentation we accessing

Over and with do, EMCOR's today. referenced the next I All on our well provide financial Securities from statements derived is summary augment Commission our earlier quarter Exchange as earnings Tony's a commentary in as opening year-to-date our several typically Form will as of through results information slides both consolidated XX-Q performance, XX. I release the financial filed included announcement third September

$X.XX over billion revisit XX.X% our or of revenues XXXX. $XXX.X three, are Consolidated quarter million up let's quarter So third performance.

Construction, million States at States Services revenues not of to Our segments. such Mechanical Acquisition period third and were our revenues that attributable businesses United positively businesses pertaining year's the United third EMCOR each of States Building quarter by time results quarter. acquired impacted owned last United Construction, to include Electrical $XX.X of

million third businesses revenues or X.X%. quarter acquired, Excluding of increased the to consolidated impact $XXX.X

the quarter, EMCOR's segments generated reportable than Building our Services revenue during growth UK third of All other segment.

revenues United or States XX.X% XXXX. million Electrical $XXX.X million quarter increased Construction $XX.X to from three at

offset the early XXXX. quarterly sector telecommunications as sectors organically within by within market transportation, projects X.X% hospitality, revenues revenue activities submarket substantial commercial the acquisition well manufacturing this inclusive quarter-over-quarter. within or XXXX segment's completion the million, large of within healthcare $XX.X Revenue the and grew certain sector to as Excluding declines project partially revenue of of revenues during growth sector due market or completion the market were gains

Mechanical States increased $XXX.X to from revenues United three $XXX.X XX.X% Construction or XXXX. million quarter million of

segment's increased revenues million, of organically. or $XXX million acquisition $X.X revenues this XX.X% Excluding

As increase the remains revenues. hospitality, sectors has the been than with several trend this based all market most segment last broad quarter sectors from over growth revenue to other three within contributing overall in the across revenue gains quarters,

represents revenues in increased of year. from to total growth $XXX.X generated EMCOR's being billion segment's Mechanical third U.S. all-time for the Construction eclipses construction of quarterly or business $X.XX two with million quarter XX.X% earlier activities. revenue This quarter set this performance record record XX.X% an organic and such domestic

million million United or increased States XX.X%. revenues Services $XXX.X Building quarterly $XX.X of

Excluding $XX.X increased base revenue well commercial offset IDIQ were due site-based services revenues project million, the and activity. smaller of divisions Services or this acquisition million X.X%. Revenue by declines $XX.X services as revenues reduced mechanical gains partially the division contract Government as segment's within a within to

due Industrial U.S. result were projects. higher field of $X.X for for sales United a heat to an revenue in Similar this Mechanical million revenue segment, to capital lower million small revenues of then within in Construction quarter. gains record Services our in services as or States increased revenue an segment. exchanger shop performance of U.S. quarterly revenues offset a represents the X% a Services Such all-time from reduction third partially quarter $XXX.X XXXX's by of services level increase inclusive our Building

the due execute secure the United this of customer million result their continues of exchange for impact Kingdom as projects to in Building exchange and the foreign million Despite $X.X segment movements, Services continued as million new decreased headwinds base. facilities' the contracts of of in $X.X to $XX.X revenues add value unfavorable as maintenance rate sterling. these a well pound volatility expanding

quarterly that statement what referenced billion is revenue on revenues new last $X.XX third quarter third My to revenues record quarter for is a in Tony our earlier EMCOR. of repeat

Please an turn $XX A$XX.X million X. year's X.X% an The of third businesses of revenues to amortization and expenses quarter asset of $XXX.X approximately quarter in organic general quarter-over-quarter acquired incremental three Selling, includes reflects represents of increase from current resulting million. inclusive quarter million $X.X increase and approximately of million from expenses of administrative Slide intangible XXXX.

mentioned costs segments. achievement of experiencing a to the new the support an have as employment organic sequential most head among I quarterly we strong records, primarily are increase with growth in domestic revenue As revenue several reporting the quarters, count our result for of increased of

$XXX.X operating Reported represents operating operating million performance, for third third quarter income record. $XXX.X quarter. XXXX's new a represents a quarter's absolute million in increase income million compared revenue the $X Similar dollars this as of to income our in quarter to of

the construction within in of of each X.X% segments well as as details margin third despite U.S. to contraction Industrial to Services of declined the segments the X.X% in XXXX and income, due quarter from this However, reportable operating as quarter margin U.S. has increase operating income slide. revenues in of through the I XXXX, our segment. our of operating performance modestly operating will margin continue each our third cover of I

reduction completion due construction prior-year operating income a Electrical third basis the quarter. in had reached favorable projects million of operating $XX.X X.X% Reported transportation This to over reduction that decreased U.S. the certain approximately from is $XXX,XXX represents the of of substantial large approached margin in in period impact XXXX. point or comparable year's period. Our Construction segment XXX margin operating by last XXXX

over XXXX, U.S. mix, projected last Construction which later completion. Operating $XX.X XX X.X% projects year's Mechanical quarter in approaching represents stages are quarter. the third a decreased profit number includes X% that margins a or than increase typically points of large by result million period greater third the which lower a reflect million revenue as from of a of of of stages income $X operating of earlier segment basis partially period, the completion, gross projects margin

favorably final of XXXX. in quarter two were the favorable a completed resulted third periods. prior XX on for were settlements this QX operating projects These impacted operating income margin XXXX value by margin impact in for contract basis that operating Additionally, point segment's and settlement

a a operating has increased over over million of revenues Building by third from income, million construction Services quarter $X.X just million Our and represents XXXX's reporting last quarter. increase combined U.S. operating for businesses million. or U.S. $XX.X X.X% Operating $X margin year's which third X.X% income of of $XX.X

profit which to margin profit services service our gross period greater Operating gross operating margin contracts benefiting executing mix providing with and this from the mechanical improved segment all-time quarter-over-quarter of number quarterly an operation, projects operating margin are of for in due represent are a then work, record which and reported XX in improved is and greater margin Both by increases points and opportunity. comparable XXXX performance. income basis

last year's X.X% Our or and the work, represents segment, third income operating of XXX XXXX impacted relatively that million carry U.S. turnaround margin of for quarter. decrease of a of performed negatively from small margins of of quarter work segment. typical income Services number profit third Industrial Industrial $X.X operating million which included were projects points Services this $X.X revenues, of in lower within gross Operating margin basis operating and and greater mix an unfavorable our by capital a segment

the each to this one reminder, the tends for a year segment. of weakest be third As seasonally quarter of

customers XXXX. Harvey Although our turnaround due in the XXXX as late XXXX, impact see of did of in to and work suppression after we early Hurricane prolonged activities an the in activity uptick commenced both

by results Services increase operating the the of XXXX. reported improved as segment a third pound the the XX in decline X.X% $XXX,XXX. slight points in U.S. by quarter compared quarter million XXXX's operating in third represents has within despite which X.X% of negative Building sterling, to basis impact of dollars of margin Operating reduced of margin this UK $X.X approximately income over

X. in now Slide are We

for by quarter million. is slides Additional financial million absolute significance not three dollars of in gross previous follows. as XX.X% the or improved in of items are profit of the Quarter $XXX addressed revenues $XX.X

margin profit contracted and due in our has points our segment. U.S. gross within XX margin construction by to gross basis U.S. a our However, Services operations reduction profit Industrial

number increased the greater consistent period. attributed period additionally, U.S. mix commentary within with be to contract a project declining shift projects shop The gross of includes services income projects earlier of within over segment capital our decrease profit number margin our segments my cycle, a a and small U.S. can our life Industrial and construction in profit revenue of operating portfolio a in their to Services as stages of the in margin reduction revenues an as result gross

is or operations quarter Diluted for earnings to per XX, comparison ended common continuing from $X.XX September share XXXX. $X.XX X.X% quarter-over-quarter. represents This a in improvement the $X.XX

due approximate were tax year-over-year. which and year-to-date year Our through where for XX.X% my an On our XX.X% relatively at to of consistent the third quarter tax than quarter rate for expected of previously slightly for third rate of the our income higher second is nondeductible XXXX to expenses rate increase tax the basis, of a XX.X%, with certain is communicated is range the the end tax rate we full XXXX. in midpoint

to our XXXX. revenue their during quarter cash flow performance with experienced by of of have as organic growth, continued $XXX.X we Despite continue sequential quarter operating investment. in We strong continued exceptional improvement companies to cash activities quarter the actively third our operating our million flow conversion provided capital manage working cash

significantly we fourth expect through we cash into of positive operating year and were nine momentum the the quarter We of months where now of continue are ahead XXXX. to flow first last

are on XX. now We Slide

of our results billion our million year the XX.X% or attention turn period. Revenues With through billion an $XXX.X representing quarter to of in increase the $X.X prior XX. now complete, as $X.XX commentary to September let's year-to-date compared

Our to XXXX of year-to-date million businesses of that period. revenues acquired pertaining were year-to-date EMCOR the $XXX.X businesses include by results a period such attributable in not the time owned to

strong $XXX.X the revenues million or a businesses increased impact Excluding XX.X%. acquired, of year-to-date organically

an Significant reporting movements due growth revenue our despite the revenue exchange by segments augmented rate almost of year-over-year. foreign within our unfavorable Services Building headwind across was currency each revenue UK to $XX domestic million growth segment

profit profit gross other margin quarterly Mechanical XXXX, U.S. profit my by segments. of while to in improved segment of Construction greater million than $XXX.X Construction flat profit the composition, of with each all or was with million XX% XX.X% reduction generated is I is gross comparative XXXX commentary. margins The in essentially Year-to-date within year-over-year. the period profit our gross Gross improvement U.S. gross Mechanical reportable mentioned $XXX.X the than revenue during segments due margin

million X.X% asset Year-to-date as administrative Selling, general or SG&A to represent $XXX.X of intangible includes of revenues, compared incremental in to inclusive pertaining of revenues $XXX.X acquired. businesses expenses $XX.X of of X.X% million XXXX. XXXX and million amortization

As structure growth. we strong continued improvement mentioned is million, period leverage overhead Year-to-date nine-month which quarter, last a $XX.X of I over to represents performance. million continue our XXXX' successfully this during operating income $XXX revenue

period basis which XX points margin Our first the is and with performance X% of operating our year-to-date static than is is margin through XXXX the higher operating half comparative XXXX.

or near of high perform project and work service We a historical continue volume to margins. large record at

nine we recorded to the continuing per $X.XX intangible was earnings share Diluted non-GAAP XXXX operations from per earnings year's reporting current increase earnings impairment period. September common ended adjusted XX, diluted operations continuing operations per number, XX.X% share from $X.XX to diluted XXXX's corresponding would compared in or continuing $X.XX EPS have XXXX been year-over-year the XXXX non-cash the $X.XX the per as share for loss, are improvement. a earning XXXX's comparing from in months Adjusting from share asset when

follows. balance EMCOR's on are its December as are from sheet maintain note XX. XXXX continues of XX, Slide Variations strength. now We to

at more million year-to-date with of nearly the flow, cash under XX, cash million strong operating line during $XX investing expenditures, cash credit debt year, activities period. than million $XXX.X $XX.X capital financing our Our including expended approximately acquisition of and December of which a facility as result XXXX, million in businesses, during has for nine-month of the of and balance is repayments covered roughly $XX

operating our XX, debt and as under from term $XXX Total of revolving acquired to of offset our by intangible strong with under principal due Identifiable receivable with commensurate our businesses quarterly in as to million $XX.X revenue increased balance assets outstanding capital lease connection reduced contract intangible result loan. mandatory to expense amortization is the from accounts organic in due asset increased our decreased facility excluding repayments recognized assets December approximately XXXX date balances and a have of as XX, liabilities is our the million continued as XXXX. to Goodwill December Working levels due well growth XXXX's primarily growth. in partially have acquisitions. five the our credit repayment outstanding

These period. amortization the year-to-date of during issuance were cost XXXX partially by debt offset the

and XX.X% have a performance and ratio year-to-date our the pursuing September call profile our us Tony? in and flow outstanding capitalization With a leverage XX, would to flexibility and happy great reduced presentation of with balance earnings underlying the numerous strong base slide of a have the and during modest return allows we to sheet like opportunities. debt strategic on I'm periods, portion XXXX. cash very to Tony. I that as a result, already our As result organic my borrowings, we at formal quarter concluded,

Anthony Guzzi

for heard time, worked years happy. I long And very the and that Mark, with XX you you're I've a first long time, say now. time you Thanks,

that be So performance. good flow must cash really

going I'm billion. Likewise over million X% the billion. XX end our rates. of growth five have while XX level when was on the billion, level, to page about December last been revenues organic the were to up $X September market at up strong RPOs RPOs compared activity or Total over talk now, $X.XX the have Total by between billion and third segment about $X.X X% very $X.XX and stable quarter quarters XX about to quite continued sector. billion RPOs quarter at increase I'm $X.XX the $XX and just up third

continue projects. a work We level large book within the as both significant and to and to small, build medium, we continue of win, year complex

and extended size term complex remain as two for burn an three typically million, between quick million to in product $X not projects and is for still these RPOs in bread projects more projects. And a and well booking quarters. period. EMCOR's as large So $X butter do

small shows market continue geography of demand to to underlying we me see strength across and the market medium-size XXXX the segments. and broad-based For of for XXXX, strong these which shows the remainder projects, into to and demand

our in business $XXX million by Services RPOs almost XX%. or mechanical segment Building our example, is services For up

in Much of the centers some mechanical efficiency does effectiveness around of mechanical desire to the the HVAC, systems, work facilities, very are those building our the even lighting electrical services customers' of their project those work and things controls, of cost and that this the EMCOR and of energy facilities, well. small the all improve things

RPOs XX, sector. right side page by show the we of On market

We our consistent with advantage combined the XX% sectors commercial year believe participation, been work with a relatively to this noted, opportunities. little market have up that demand retain diversity range RPOs a past the has over of market footprint, mix to As of of labor total. between over making a and access skilled end-market our competitive ability us in geographic gives across wide of

As we XXXX strong. markets is our of will remain continue of end XXXX. and the move and toward We level activity we healthy the believe move this into of bidding out year, activity as

to now and covering going XX. pages I'm be XX

As XXXX, end we in at the another year are move EMCOR. of year we to record midst

a Services We good the segment. six our Industrial us We are and a offerings, and trends of of extent our about what for environment continue into at operating Building have any non-residential environment months. early strong for market these is through that XXXX stable XXXX still operating is for market, given which time believe more see and our that's year-end we each the operating our with visibility we product growing much Services

reflection we our twice. revenue continued third strength a which With have is our This continuing be will business. see through time, strong in of the the guidance our per and earnings performance we share diluted from raised operations XXXX,

up $X.X to around to guidance revenue billion from our $X.X moving $X.X are billion. billion, We

we from We the of at $X.XX, of and from per $X.XX leave to range are $X.XX. the end share operations our end raising bottom earnings top the will continuing

fall above in of closeouts, with flow the the and at end matter the gap of us this a strength project range, and small end at duration from to top net a schedules. lower in our expect range the is year, range the moving cash our income We of or the of point only timing, turnaround

capital little Let's bit talk a about allocation.

five in efficient, opportunistic manner last as years. same in allocate the to manner much and balanced, we over continue will We have capital the a

shareholders term, priorities Our business for return third to companies we dividends growth, and will first and to repurchases. our are through acquire the second share support long build organic to cash that

the have in acquired mechanical segment. Building construction, Services companies, example, five our For far thus we construction, have XXXX strengthened electrical and

opportunities. of existing our pipeline large tuck-ins and growth long-term capabilities for have subsidiaries bring a operations small geography our and We stand-alone can impact to and good that positively new opportunities to end-market

a contracting, our On signed announced this with complex will year, X, the in have in EMCOR the the operate $XXX subsidiaries subsidiaries. position Batchelor known in Kimball, Construction, same They Mechanical construction Construction as BKI. & of as we EMCOR of bring our BKI same million Services. with the leading and to results top best market as Southeast revenues project we that otherwise October about mechanical acquisition and capabilities EMCOR have quartile mechanical

the weeks. next We few expect to this acquisition close in

invest As to the to before typically those significant share revenue, positive term see two our first we on EBITDA, earnings Therefore, the backlog, four with cover acquisition. backlog and acquisitions usually a reminder we who continuing operations. these we see buy have amortization expected will per we businesses us, in long the from cash impact as and impact from in quarters post

also our important new opportunities organic from in in all growth digital segment. We of made Services supporting businesses Industrial productivity ranging incremental to our in investments capabilities growth have

year and going well, XXXX. into going well this record are close are positioned we We to

questions. to that happy said, call over the With Laura, to turn take we'll to be you

Operator

Instructions] Absolutely, and of Noelle thank the Dilts your first Stifel. from coming from have Presenters question you. we line [Operator

Noelle Dilts

be a was the hoping additional your maybe more thinking if you bit see some how could Just legs in verticals bit given indicators and a you're little you you comment about non-res may into of some of cycle those the key I market, just markets mix cautious? be starting where versus little where the leading to on some

Anthony Guzzi

we're is growth, us as think lot doesn't for alarm get We've than yet. with market participant cause the a some it seeing single-digit market year-after-year. that a long of high-rise significant mean, were contraction other residential we has bigger big giant not frankly, because markets we so growth I not us I in that as time look, long opportunities. in, said any a many which low Yes, Quite deliver of on a in even such that to count a contraction for of this can big small

continue see continue the infrastructure manufacturing get in to We markets commercial the to you market, in that's in continue telecommunications one you specialized two, short. ways strength especially see to the because strength continue we to strength in large market, strength manufacturing, data some see in hospitals, we of we some see healthcare or if get episodic

is day of on, building us building Hospitality a a you source couple and right new key of also markets. Water for to in now, Florida be strength luxury depending we're in wastewater other of are that gaming down mainly because at are new positioned cause South the continues hotel, can a be the end of episodic you where and facility.

is, to efficiency, the combined put to some contractor. be So only to as think to customer especially two efficiency assuredness doing part you that continues customers, strong, part, work see work generation energy and is independent to not system more very can of we're you but relates energy Noelle, building we're I of work duration upgrades, together, distributed short it the payback, those the work controls energy is that leading more control bring

the more allows continue that and past. operate to actually position to it over our their building in it in control positive going out We build efficiency, way done how the owner, activity, than is would have a drives been drives

a to deliver right The shareholders. growing pragmatic. us now forever. is not continues that grow our for like Sure, market that's is would love it to we double-digits results fine So good market for

Noelle Dilts

little second, And labor was I around and regarding you generally expand availability. could your on labor bit a hoping cost comments increases

of seeing As opportunity on are labor that, front? through you the dynamic labor, cost strong. remains basically a bit that price some comment given the higher tight market Could recoup pricing some for very market costs labor on you remains to little the just the

Anthony Guzzi

can can things Yes, the If worry productivity cost right, then on about and excessive a pre-fabrication per than I drive do work look, mix that labor. job a labor do If right in we we we to productivity kinds BIM mean we the labor of through hour more the mitigate of we can dollar our we lot win.

other to the are and the for thing tied you argue CBAs, labor. those CBAs non-union also union is price workforces our set The could

they particular skilled person many times because factors, going especially and the people, based workforce to permanent finding this no on are by would part but have say your, and not Noelle, by said still order. most large, to say, we're definitively doing unions what to want PLAs Mark of work. would reasonable you where become the the comment We're one our best been the that unions, I've been must that's say a going still more And trades not reduced rate win going the a decides agreements a and large and And I also, unions, be they're to overall rate work, of local number versus I'm of reasonable. market, and all which have there please in at

in am working almost going is, bust to sounds I week. markets do in than trivial, good First every go their they That bad get because but overextend more capital. markets, contractors paid they

you to keep going we look the best the have safe, are is, really day, hard best in best safety definitively can record every say and in safety we the industry, in they the thing industry. training the second work for me the to industry, safety The investment

markets know project And managers, operations CEOs, folks supervision great the work. work. they about I part actually people I'm foreman, our country, for is a to I job going become going than to carry-on other this we in am you, do pick of have, a great I company local if doing, thing and third the know care am finally, we've team, and superintendents, my what I The got few your labor. core

that going time. I'm in downturn, all comes market because to that. market. add if The I core jobs. unions I that being to don't to the EMCOR team to part company our this look in I'm can the the to that write-off Mark, or become at you going pick able of overall, work. a in local be That labor said, mean, have got to anything you

Mark Pompa

significance I been in track have from once with Clearly, a think, benefits. long a reap very record working of an years don't number great destination the again, choice result, of a we we've underestimate employees' successful perspective. and we base, both for I the employment as and harmony think of of our

Anthony Guzzi

we're And right. Yes. blessed,

chain trust, be I workforce, carries think know to well, We and it of local command technically here. We said adept, to going be our and we're with to from as EMCOR, and the as that choice entire labor, in being best of well a Mark know came part I that know we and done service to core what respect to and know believe a come respect lot They that, here think get of techniques going labor. expect and they in one it, that be have CEOs installation mutual at they it, our a on of treated they're choice, our destination there they're them values techniques people they're and destination they it's of treated day, down here going to of our and and on are. goes up-to-date up well,

Operator

you. Thank

Davidson. D.A. from the next Thielman line from of comes Your question Brent

now line Your is live.

Brent Thielman

I anything on flow. Mark. can I quarter. color contributions on Hi, cash of you maybe had couple there there? quarter, more know I business or the strong this big is incredibly back you guess this else units add mean any And don't if with just free just whether a

Mark Pompa

No, it uniform. was

season. a byproduct than would industrial, have different a just of last was contributor been turnaround that quarters, the segment only two quarter the that's and in think I three the

was arrears, the is contracts, since turnaround quarter, during the and quarter the that spring executed to and two time majority late a wasn't three. monetized of So quarter material bill the until season, and they on pursuant work work

just it's function with jobs. a workflow of Otherwise, the the

to will try billed to our that's commentary, that our when expect advanced three, were as significant fixed-price contractual do, the quarter it does in many the we to remain succession, for result strong clearly we've growth terms we continue monetizing extent it to amount fair my but of structure quarters can four that prepared been we with organic successful for in as that try collected ultimately, experiencing We now a in work and get revenue as well. mentioned, I and what flow, cash we quarter and in in

Brent Thielman

Yes.

kind there a beyond And then then Is can and qualitatively few or that guys they're kind the obviously combination EMCOR. Is opportunity with there around, maybe financial through Tony that, them a say on quantitatively their today? growth or benefits, the realizing just rates last to opportunity BKI. Okay, not just the of you you bigger of years. anything big in

Anthony Guzzi

privilege like their that It's union that's companies we be of set base well have basis. application we're forward him question are a Mark think times. one those great guys of collaboratively and down looking terrific are something competitive. a They us, couple meeting workforce development, employer the ahead a had and most weeks some a of revit, across we're in on do the company able take and to EMCOR a there we leading people. So destination that a a doing about modeling, an rates, these wage and to I across local and BKI of edge They're choice. They of we'll improve the said, and like, We're very superintendent. pre-fabrication EMCOR. ago. contractor, things was their for have the BIM of we're are little few

through with, what we income below how the in an that are. in a do million we're top at operating with about they'd base, but talked the be margins business, EBITDA short for margin backlog, we account of company as term. how their on it quartile, the probably how some burn benefits is has income We've little bit around operating to nothing we initially segment Mechanical This $XXX the perform and the operating a

have that I some we that is, customers mean have into like in. customers. They travel not customers do to to that we These There's have. would were folks there markets have the ability Yes, us more.

that to some maybe we're that. have their go together currently serving. can product places, capability some to and We there's There're that to we lines not we of add offer can customers

this little We're data work, but people, big both maybe do Georgia some center at some together travelers values, markets, fire in the and about very if these food we or workforce not for bode us than Terrific protection ,run good bit typically, generations acquisition. feel Tech by it could long-term. processing a other pretty well work, development we EMCOR, great in technical engineers, of of of of

Brent Thielman

quick year? on year, do more mean I One based as strong hearing great. Services you be turnaround you're had that's last can from you fourth XQ Industrial you last strong as what again, can one of normal guess really a Okay, quarter what you I and customers in season, think see terms

Mark Pompa

I it as as don't if be year, good. it'll pretty Mark, be will strong but last know

for difficult remember, will quantify got three look a like very this quantify of normal. a time it I although kind was year, think ago to us difficult quarter last more it's at mean in us to year I it seasonally you for going the difficult is QX XXXX. deferred of XXXX. QX even into to that XXXX. not storm, in work more did it's impetus in the benefit as result that and But clearly, going of and some obviously was There kind be of to a

places we be or said in having get get executing haven't idea consistent with going we the we be way is start that, on no until dependent there, for while we budget, the all initial to thoughts a in if on our we been we're going when scope against in find so have in what expanded, that to it there. But little working

Christmas as our the service we're we our but shut approach to So, provide is get value have as the we do good thing to the everybody's on holiday. best to site, down going that they labor best and customers toward

Anthony Guzzi

workforce. to and if we particularly But job to business in can bit more it it a just is, above we man-hours I full permanent impact, can get seasons. it's start what a little workforce now. think the this reality an don't planning, about that our off this up, flex wrestle guys were of right a in they when that little lot within in a right, you also have, were do And like have turnaround planning, in one you upsized versus is contribution in know difficult doesn't have permanent bottom down the and business quarter, it, and And take things sometimes great said, the on we they the Mark flexing line a a absorbing flex we fourth of you what once better up

Mark Pompa

we would thing why I mentioned which a earlier were And haven't other the really in here levels, of at margin reasons as I right year as ago, the is, guess this order contribution the currently was is three add, I today, aren't only one down time significantly busy quarter they now sit as shops as in changed.

within So, a is and I'm work sure executed from mix the segment. the you shop is this perspective, profitable revenue that's remember, that work, as most

develops that how as see we'll go forward. we So

Operator

you. Thank

Davis. We next coming line Adam Thompson Thalhimer the of have your from question from

line Your live. now is

Adam Thalhimer

you're modeling I thoughts? digits. a your standpoint, not Tony, topline kind But low single know line in guys roughly I guidance. give So from me XXXX to level of mean is going high like with are that

Anthony Guzzi

of You're to non-res right. talk expect to good with now. look as XXXX, going but We grow guess that's BKI. in the on the right I'm business. going stable, going be about rest Whatever not would mine to what we're is know, to bringing is you your backlog grow

part, addition The for non-res, on incremental have the of to already. digits, bigger ones, talked BKI. single-digits plus smaller the rounding those flat ones low impacted low the impacted, year-over-year. lose ones Mark other the most acquisitions, the about you'll single the XXXX other expect We have in

think fair I that's yes, say. So to

Adam Thalhimer

sure make I points year-over-year. in QX it to was down because, understand want one margins XXX I then the basis And electrical

stage You in you of quickly where that that range Was early snap there? anything have And then projects. been. X% talked there does of more else or back how to X% some about kind

Mark Pompa

Yes.

and that performance if on average construction where just year. a Electrical. the at is specific we some both were margin year geography Electrical, a of to as in or this projects earlier Northeast Clearly, wrapping transportation look a five not they're you average. ago ahead been performing work projects they've this operations stage up eight not existent year Mark. Mechanical basis, with in when the domestic infrastructure on certainly year-to-date year is I of what's margins an the The of So, time, were this large Construction at our mentioned to going on

the execution we're said are Electrical and RPOs and on these segments as has times with quarter-to-quarter So, Mechanical happy executing, and for mix is on mentioned we clearly that teams Having with operating we work we're prior are both our and Tony the with in difficult, the what're company are of the numerous revenues our of that, or development life the type in project mix each providing. calls, because where of cycles. of just happy margins

Adam Thalhimer

no Yes, bad jobs.

Mark Pompa

opposite. it's actually quite No, the

Anthony Guzzi

Right.

Mark Pompa

a trailing badness a Electrical six you remarkably like Electrical They're Mark in over itself. X%, XX X.X%, [indiscernible] in last look mean steady fluctuate months absence trailing Again I XX look if We've you month by margin We've X.X%. of when back. really trailing months XX said remarkable, will quarters. had had remarkable quarter-to-quarter. the

Adam Thalhimer

guess segment. Whereas more you're a Services amazing highest when versus And build services, mean to I be you mean question going. like bought your almost, of business, it where comment get margin I to took you high then USM? Tony, building that you of is maybe a USM, kind years that's almost I I than just don't when what margin, X.X% question. the years we ago, wanted building level bought would six, to this see are more seven But know,

Anthony Guzzi

now. of I think we right are mix really work good

project We overall, our continue well. implement absorption labor said mean, large of look… We're across we are, I We're and projects doing good our getting management facility take contracts, integrated. to and needed to portfolio. project, and We we're advantage some we opportunities fully it on

Mark Pompa

flow We're a through project to good get going

Anthony Guzzi

Yes.

Mark Pompa

contract From customers. our maintenance

Anthony Guzzi

of decrease quarters well. doing large had as contracts revenue and double-digit one wrestle X.X% Adam, performance. of is, a remember, row, if lost is we're four government mean a had in we growth. Mark, some through, What big the contracts. things is So to site-based in some we I it, terrific you we

Mark Pompa

That right-sized the portfolio,

Anthony Guzzi

Yes.

Mark Pompa

margins was And time result period. of that, during painful as on it a that

that, some to of a than clearly a business interrupt interrupted we've result strong it's So plus apologies, which the extremely over and businesses added had not have is improvement exceptional book the diverse offering before. we've we've quite of so and service as Tony, I my last the five Tony, taken years opportunities we margin been of. in now, And that advantage that segment, has more provided but got

Anthony Guzzi

known born of they everybody does every Bordes, being guys how EMCOR really CEO is We're guy. this it they it, think sort We by constantly. team everybody only Mark these portfolio. to these right-sized the when they day. that the and I EMCOR, other not incremental CFO, that very that productivity no-frills their side saying of was folks Sada, case Mike how I mean everywhere, The led what And especially about experience that cost really right-sized nickel, every as is, of all, think their frugal. really, Anthony at folks of but at do these got crazy. to SG&A But and they of watch that's but the they watch portfolio, happened ahead contracts. lost because what they They are get

Operator

you. Thank

Sean We from Eastman KeyBanc your coming the from of have Capital line next Markets. question

live. line Your is now

Sean Eastman

of highlighting the I velocity year, the wonder call, should Tony, tough grow look we we that, just on go moved guidance bit on sort nicely in on is pumped out we all next through do just of comp kind is, up non-res a I'm overall. any year? 'XX. pretty move as any up just me sound and that of activity, can't you reason to into next we line for year last as the not this be revenue as question of at considering pretty line, a First picking change or up I'm wondering backdrop you with there why top you're next

Anthony Guzzi

of XX.X% most trailing mean, with and mean of once let's they've always clear, us I is for decided organic piece I with get is our make that, right, how people don't customers. comp. X% We a that project choices comp. a I we I are to people don't our binary. and get mean, tell I project, clearly going tough a a And months mean, that tough the be growth, it. XX of they're award the usually

off off get it's but We're yes, not and fair assembled XX mean our my and hats and than I'm than XX.X% much we're to the would only our won more XX.X% months losing. that organic, here of with we trailing We more to folks filled. exceptional team share obviously over take winning I hats the

non-res one to two to that's next I one growing maybe year maybe four. to three With third, the market think,

ask it. way question, I the about you the think way right think your is to

Can that with we in line non-res grow market.

think expect do answer that the I to is to would that. we yes,

to for going would certainly going XX.X% quarter, do am are mean, year. certainly we we that are that up now yes. I every And Now not revenue to quarters, signing I some exceed growth or at a you're right organic next and is not us certainly now that have the be comp tough $XXX, we for first year half unsustainable, the wouldn't but we right. stock paying I say this know of next in that.

good a have growth lot team We there overall, have good way industrial this, we of at think owns underlying in a as our Construction, a as in growth mechanical of who to is our those of segments to I If do construction each a look it. about you management businesses underlying what like think think try segments on and for each we good businesses assets.

And so does electrical. is

there actually very developing get the do a it right you think that estate with construction Mechanical base all the as good now, energy a some now, come to a industrial services. guys they building because you as Industrial, a niche the taking back advantage ECS now. strong their might efficient right say, creative in deploy So We're we desire product organically affair and we very technical well team And that's customer's people as diminishing to is the of in as labor is in have and opportunities way better to Services they're manner market can realizing then continue, around be love training. to have efficiency real way in

overall. growth those EMCOR we try call customers more really concentrate broadly, get, lines resources What water, do to to at in I the then the of with look always and do opportunities is

going we've BKI made if So the think year-to-date, five now you add to and it. acquisitions to about you're

of now had a heck those as You again, next year all heck we're each and altogether, decisions binary of a up one wise, year teed too. we think, to acquisition add a it of a have we year

due do do this good operations better and We a and integrate diligence, that staff really our long to have good we day teams it's And ready our to really than we're we diligence time. make do in sure one. due

for really is business. then about can find cases our can across exploit well, geography as we we something growth putting try we wise, drive can So many engines as both growth business as do serve we in we capability once and sector-wise, to we're many and results to us places end to and wise, responsibly contractors, that into market as customers the out, the

sure to say So be be ought year, grow that's that next modeling to with market not to the would XX.X% a organic good long-winded a but to we pretty yes growth do. thing able I'm answer non-res

Sean Eastman

Services just Industrial for Very this gears helpful, little that. the shifting our thanks And bit segment, a below over quarter, to margins forecast. a little

more to have you path the us just think that range more and the hardware. work shop out I provide type welding, can more you color back and maybe a in of the of a segment, types mid-single-digit coming mix between there field and guys whether speak little on turnarounds they're mentioned, to you bridging

Just to the kind of trying margin understand mix work out coming of here?

Anthony Guzzi

and segment. related electrical we do of understand but the in on work of and don't versus welders. Yes, we do have steam centers and most capability work that we I'm pipe it fitters experienced hardware. understand I welding not and sure the that's our Most is fitters turnaround electrical about mechanically that, I turnaround do,

the two path right. the shops. to back More things, comes think repair I work in

full the Getting to cleaning in up stand capacity our first quarter.

shops, repair capturing not turnarounds, ours. in that all think for do the I just it's those more work we and

I add California we work, work, higher LP do cat do a we have continue with to we margins, think work, that and midstream good back and in also some niche services upstream cracker and that into refractory have it's to the some product way. we continuing offerings of are

been. way We quarters to the has of base rebuild to there we and recovery, like been look union just that sort unique has lot there, and because and continue have of it's been We've six do a think a right. back can that, had contractor a Mark, going path we I on, we're

You stay need have consolidation on and that. to Mark, you a industry, mix top add? crude we have to of all slates, anything

Mark Pompa

think spot Tony I is obviously Yes, on. sure,

is the best there that that there returns have clearly extremely front a the past which is, team calls. is schedules think and the than working they at some issue transient them. with of the little our of there our from businesses to more The we've I down perspective, some bit work in hard we we've extract workforce and about in talked of find changes other in times absorbed gotten customers' do ourselves labor,

we're the that to some and with particular, spring and not in well of in stands fact able the for well wash the those this or with season take Southwest out we're services things stand the of or turnaround to lot hopeful of throughput, advance pull capital weather season operational wash investments productivity make through where we've issues get were we the fall spring order the the regards but don't season in in in is, of of And in either were in turnaround business additional both we ground, we've to markets to spring a and get region place country advantage of unfortunately as to the local certainly be better have capabilities, we that of the have XXXX. of going as with had rain, but to fall us matter continued providing turnaround to see

is and little that customers, of that in services certain price being our people to more services. similar of have a a are a our concessions their And on are Tony with mentioned in regards disciplined consolidation, and competitive imposed there unfortunately landscape customers some made nature, are lot customers other been our our there procuring local are that being bit providing

control the as relative the margin mix it's of driven those to dictating labor to the the of all be pricing. have work productivity opportunities opposed So absorption in enhancement, market who in to labor and by clearly our there

there back some So we the in in we're hopeful, at future, but point we're not time just to that get yet.

Anthony Guzzi

I this this if look Yes, thing, I year from a you to two take think at forward. mean, point three

the that but you to I takes understand the about Mark majors, takes it's about capital actually of the in to happens that do, the amounts sub-scale consolidation term and to have of lot think a your crew have your productivity on mix schedule. working do, It's consolidation it's local of a programs safety is to you you on us. people of with and It's your about organizations equipment they they have that training have that right, labor of Mark that companies of a It's bring disruption, large ability about it takes as lot it said trying to the not deal to short on, to do, when it of site. flex are helps lot workforce, up, a And needed, that ready. like cost just how takes like ability labor, the sophisticated labor. about hang

proven in the well all that we've uniquely to above, do positioned the are of and past. We

control, against rigorous put operate years people the business significant local decision on So rigorous ability as to with businesses other at that now experience in execute brings still that from you're more becomes, expect and on decision initial of just more more been consolidation. have many a really whatever ability the contractors all going decision of time, and long-term. kind now of to making in making to going market. right other and the two years ago, not is It's long-term, that decision to market rigorous favors good more that it of all operating isn't becomes period parts more that us my the together, the making to like phase the as think, through rigorous your centered this the price, three I I that and way very making the is be that your that right our customer in be consolidation us, available

Operator

you. Thank

coming question Sidoti the line of next from Company. your have We & from Joe Mondillo

line Your now is live.

Joe Mondillo

wanted squeezing the or answered, questions to me ask two just of have one Most thanks for questions. been in. but I

downturn your sort non-residential just what of just in was the Just you in being as pointing related you're flat necessarily tone, well it's at many that can Dodge you with to market, of commentary, in a theoretically or to the more a construction which see asking the look to There it's your and saying. indications wondering companies in is what of obviously I'm starts be the as inflection see because that, on reflected actually downturn you of from to and Architectural generally we've line sort down, the sort non-res already not are Billings supposed whether of construction Index, upside the heard space.

giving So signs there at, anything is you macro or that anything sort I'm look point of can wondering any inflection you would just to what of in that your be business?

Anthony Guzzi

get is down every a I and be that our eight space least says, bit, at sense, people pick everything one, FMI, before, to then we. or mean so look tells little then macro macro, the so it's we talking give binary, All still look us what like is a said data numerous we I've five at macro different that look at starting might I you've into in right, at So big and Dodge, a something, predict, decision to maybe are about flat you other, are okay, can market, I we ABI, missing learned we sources. even but to are where

we the work, work, the going right. And going that's bid at that And we then look think that and one of country. and crash, look of get watch what's logs look specific do is They're we at the like, to Fitter actually at the $XX week right. the I right. National the is, are winning, at how the on, at Union at absorption every of jobs a on I what trying pulse we're doing tip across spear, look look look Sprinkler labor actually the of what that over million. bidding they're I we time they're spend velocity, with is lot have from they for people do We front mean, in things what work, we because we

and are say and maybe stable have X idea say, going I this relatively the the a to market going what we six So and that an is XX individual to market continue about that visibility, they lets strength those months, all do at us we that it us looks know actually to gives and up caveat that doing what for we okay, our overall, less and months. worry next we then lot at look is we is things somehow look overall about we the to and have places good to all have that strength,

paid and do, which is how put apply you get we So we judgment, that's that you go. get we what to then where and all in

Joe Mondillo

follow of your that, sort second there. of specifically up Just especially on the, answer the part

manufacturing the some of think there. side On I things, you to you're mentioned see continuing strength guys

to because actually sort projects surprised the I thing. the one significant last manufacturing from week, thing, where we're coming where CapEx Are same that's reported One type economy slowdowns. that through at, of you one of certainly of the saying seeing your guess, can side, of are point the we part peers

there is the side? that, pretty all market, at you it's the sounds on are continuing well, to strength trend within but in any like manufacturing So that see surprised questions to

Anthony Guzzi

sense in I yes, not things why, of, I planning capital the how long-term, customers on mean don't no Yes, and mean of know quarter-to-quarter, all move our with multi-year basis. I I'm a a

I your more more make Here's think, what plants efficient. productive, think, them in to have more we make and I facilities and investments to automated,

make automated, So you for to logistics more energy make to you you've got more make them got have to and work them you. the efficient,

win. that a compete have you things, and those manufacturing all facility do can You

just are there opinion. that think some on are exogenous factors going my is now I and this

an and in people a by way I us. their think, chain of impact that a mean lot relocating I and are having had already is, that supply for in EMCOR, its the China happen what people like trade to in back the that U.S., major on have doesn't ways, good has for impact, to it's

have bringing and to productive, Southeast, Midwest, and efficient, more when are a in to I'm positioned like And the companies first things more facility that, more that we're that's point, and achieve China. back other I places. automated, from us the back EMCOR help manufacturing seeing do I the that, Go

big think in there's a yes, their long I steel people things maybe things, other but manufacturing for the picture, like are slowdown supply repositioning So chains term. and

Operator

your coming And Sullivan from Maxim Group. we the from you. question of Thank have Tate next line

Your line is now live.

Tate Sullivan

you Thank mentioned point, in you a can out few, if quick geographies single the think I a Just follow-up, a any have acquisition at this comment? you you can past Any, you. robust pipeline. target

Anthony Guzzi

acquisitions. too get we we're add to capability, fill specific little white in already space start would continue also and we in get as I build to capability a can. No, we we new in, to where our closer say, markets and

Tate Sullivan

All rest of good right, you for the Have a that. thank day.

Anthony Guzzi

next here reporting another talk you Goodbye. we'll be right be a going Thank you, for is we of today. EMCOR. Thank safe. be to all to year. interest for Great. end Tate. the we great out That's year, it. you collectively This last Thanks year can be say we'll in your into Wish will be record all everybody which great and the until the questions XXXX, time XXXX, on

Operator

for conference. This everyone today's you Thank concludes participating.

You lovely Have may a now day. disconnect.

EMCOR (EME) 29 Oct 192019 Q3 Earnings call transcript