10-QPeriod: Q1 FY2016

EMCOR Group, Inc. Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 28, 2016For Securities:EME

Summary

EMCOR Group, Inc. reported solid performance in the first quarter of 2016, with a notable increase in revenue of 9.8% year-over-year to $1.74 billion. This growth was primarily driven by strong performance in its United States mechanical and industrial services segments, alongside continued strength in the UK building services. While overall operating income saw a slight increase, the operating margin compressed slightly to 3.2% from 3.5% in the prior year, impacted by factors such as increased SG&A expenses and lower margins in certain segments, including the US building services and US electrical construction segments due to specific project challenges. The company maintained a robust backlog of $3.85 billion at the end of the quarter, indicating a healthy pipeline of future work. EMCOR also continued its capital return strategy, repurchasing approximately $26.1 million in stock during the quarter and maintaining its quarterly dividend. Despite a net cash outflow from operating activities, the company maintains ample liquidity through its revolving credit facility and cash reserves, positioning it to manage its operations and pursue future opportunities.

Financial Highlights

50 data points
Beta

Revenue

$1.74B

12.8% Gross Margin

Net Income

$34.35M

2.0% Net Margin

EPS (Diluted)

$0.56

Total Assets

$3.45B

Cash & Equivalents

$392.36M

Free Cash Flow

-$37.16M

Financial Statements
Beta
Revenue$1.74B
Cost of Revenue$1.52B
Gross Profit$223.11M
SG&A Expenses$167.40M
Operating Income$55.62M
Interest Expense$2.38M
Net Income$34.35M
EPS (Basic)$0.57
EPS (Diluted)$0.56
Shares Outstanding (Basic)60.90M
Shares Outstanding (Diluted)61.35M

Key Highlights

  • 1Revenue increased by 9.8% to $1.74 billion in Q1 2016 compared to Q1 2015, reaching a company record for first-quarter revenue.
  • 2Operating income saw a modest increase to $55.6 million, though operating margin slightly declined to 3.2% due to higher SG&A costs and mixed segment performance.
  • 3The backlog stood strong at $3.85 billion as of March 31, 2016, an increase from the previous quarter, driven by growth in most segments except US electrical construction.
  • 4Net cash used in operating activities was $37.2 million, a notable increase from $17.8 million in the prior year, primarily due to higher income taxes paid and changes in over-billings.
  • 5The company repurchased approximately $26.1 million of its common stock during the quarter and continued to pay a quarterly dividend of $0.08 per share.
  • 6Despite a decrease in cash and cash equivalents from $486.8 million to $392.4 million, EMCOR has substantial liquidity through its revolving credit facility and cash on hand.

Frequently Asked Questions

EMCOR's revenue growth was primarily driven by increased revenues from its United States mechanical construction and facilities services segment, the United States industrial services segment (benefiting from the absence of a nationwide strike that impacted the prior year), and continued steady performance in its United Kingdom building services segment. Growth was also noted in commercial, hospitality, and transportation construction projects within the US electrical segment.

The slight decrease in operating margin from 3.5% to 3.2% was influenced by several factors. These include increased selling, general, and administrative (SG&A) expenses, particularly for employee-related costs and acquisition transaction costs. Additionally, some segments, such as US building services and US electrical construction, experienced lower gross profit margins due to specific project challenges, unfavorable settlements in the prior year, and reduced snow removal activities.

EMCOR maintains a strong liquidity position, with $392.4 million in cash and cash equivalents at the end of Q1 2016, supported by an undrawn $750 million revolving credit facility. The company is focused on generating cash from operations, though Q1 saw a net outflow due to timing of tax payments and billings. Financing activities included share repurchases totaling $26.1 million and dividend payments, indicating a commitment to shareholder returns while maintaining operational flexibility.

EMCOR's backlog stood at $3.85 billion as of March 31, 2016, an increase from the previous quarter, signifying a healthy pipeline of future work. The growth in backlog was broad-based across most segments, particularly the US mechanical construction and facilities services, and the UK building services. This strong backlog provides visibility and supports expectations for continued revenue generation.