10-QPeriod: Q1 FY2019

EMCOR Group, Inc. Quarterly Report for Q1 Ended Mar 31, 2019

Filed April 30, 2019For Securities:EME

Summary

EMCOR Group, Inc. reported a strong first quarter of 2019, marking new records for revenues, operating income, net income, and diluted earnings per share. Revenues surged by 13.6% year-over-year to $2.16 billion, driven by broad-based growth across all operating segments, particularly in United States electrical construction and facilities services, and United States industrial services. The company also saw a significant improvement in profitability, with operating income increasing by 31.1% to $102.3 million and operating margin expanding to 4.7% from 4.1% in the prior year. This performance reflects effective revenue growth and margin expansion, with acquisitions contributing positively to top-line results. The balance sheet shows total assets of $4.28 billion as of March 31, 2019. Notably, the company adopted new lease accounting standards, resulting in the recognition of operating lease right-of-use assets and liabilities. Cash and cash equivalents decreased from $363.9 million at year-end 2018 to $252.0 million at the end of the quarter, reflecting significant cash outflows for acquisitions and capital expenditures, as well as normal seasonal working capital adjustments. Despite the decrease in cash, the company maintains a solid liquidity position with its revolving credit facility and strong backlog of $4.16 billion in remaining performance obligations, providing visibility for future revenue.

Financial Highlights

50 data points
Beta

Revenue

$2.16B

14.3% Gross Margin

Net Income

$72.41M

3.4% Net Margin

EPS (Diluted)

$1.28

Total Assets

$4.28B

Cash & Equivalents

$252.03M

Free Cash Flow

-$57.44M

Financial Statements
Beta
Revenue$2.16B
Cost of Revenue$1.85B
Gross Profit$308.75M
SG&A Expenses$206.17M
Operating Income$102.31M
Net Income$72.41M
EPS (Basic)$1.29
EPS (Diluted)$1.28
Shares Outstanding (Basic)56.17M
Shares Outstanding (Diluted)56.42M

Key Highlights

  • 1Record first quarter for revenues, operating income, net income, and diluted EPS.
  • 2Revenue increased by 13.6% to $2.16 billion, driven by growth in all segments.
  • 3Operating income grew 31.1% to $102.3 million, with operating margin improving to 4.7%.
  • 4Significant increase in cash used in investing activities, primarily due to acquisitions ($31.1 million).
  • 5Adoption of new lease accounting standards (ASC 842) resulted in the recognition of operating lease right-of-use assets and liabilities on the balance sheet.
  • 6Remaining performance obligations increased to $4.16 billion, indicating strong future revenue potential.
  • 7The company maintained compliance with its debt covenants under the 2016 Credit Agreement.

Frequently Asked Questions

EMCOR's revenue growth of 13.6% was driven by increases across all its reportable segments. Significant contributions came from United States electrical construction and facilities services (driven by large telecommunication projects), United States mechanical construction and facilities services (commercial, manufacturing, and water/wastewater projects), United States building services (mobile mechanical, energy, and commercial site-based services), and United States industrial services (field and shop services, benefiting from a normalized turnaround season and increased demand for new build heat exchangers). Acquisitions also contributed approximately $48.4 million to incremental revenues.

EMCOR adopted ASC 842, 'Leases,' on January 1, 2019. This resulted in the recognition of operating lease right-of-use assets ($228.1 million) and corresponding operating lease liabilities ($48.8 million current and $191.2 million long-term) on the balance sheet. This adoption did not materially impact liquidity or results of operations, as lease expenses are recognized similarly to prior accounting guidance.

EMCOR reported remaining performance obligations (backlog) of $4.16 billion as of March 31, 2019. This represents a significant increase from $3.96 billion at the end of 2018 and $3.60 billion in the prior year. The substantial backlog provides good visibility into future revenue streams, particularly in the United States mechanical construction and facilities services segment which comprises the largest portion of the backlog.

EMCOR's cash and cash equivalents decreased by approximately $112.0 million during the first quarter of 2019, ending at $252.0 million. The primary uses of cash included significant payments for acquisitions ($31.1 million), purchases of property, plant, and equipment ($13.1 million), and a decrease in net cash from operating activities (partially due to seasonal working capital adjustments). The company also repaid some long-term debt and made dividend payments.